Sign Depreciation

[PaulF]

I have a new client who put up a free standing sign on a post near the edge of his business. The other accountant seemed to think that this is 5 year property as well as landscaping and electrical improvements being 10 year property. Can this sign be considered a fixture since it is not on a building or should it be a leasehold improvement?

[Kram BergGold]

My guess

TTB says if the item dies not fall into a category it is 7 year proeprty, so I will make 7 years my final answer.

[veritas]

I'm going with the first accounatnt. five years

[jainen]

real estate

I haven't posted anything outrageous or ridiculous recently, so I'll go with 39 an' a half. Attached to the ground, it is indisputably real estate.

[Unregistered]

Trying to stir things up eh? Good it's been kinda boring lately.

Signs are personal property.

[JoshinNC]

I'll go with 15 year property

TTB pg. 9-8: "a) certain improvements made directly to land or added to it (such as shrubbery, fences, roads and bridges)."

A fence and a sign seem to be similar in nature, and thus I believe the sign would qualify as an improvement.

[S T]

Signage

I think it is 5 Year Property. See http://www.cpadirect.net/client_serv...cfm?pageid=199 There was a court case with Walgreen's.

This MACRS classification is so broad that about the only assets left out of the mix, are tangible personal property items used in farming or manufacturing activities. A court determined in a case involving Walgreen's that even large outdoor signs advertising the property, or decorative canvases displaying the store or firm's name, can be taken over five years. Thus, if an accounting firm spent $10,000 to have a lighted sign anchored to a cement base outside the office, five-year MACRS depreciation could be used. It would not go into the 39-year realty class, or 15-year land improvements.

Sandy

[abby]

Guide to Assets Used in a Retail Business

per IRS Cost Segregation Audit Techniques Guide

Signs are either 39 year - for Exit signs, restroom identifiers, room numbers and other signs relating to the operation of the building

or

Interior and Exterior signs used for display or theme identity - example would be an interior sign to identify departments or exterior signs to display trade names or trade symbols - would be 5 year.

Interesting to note that the pole is a separate category - under poles and pylons - if poured in concrete footings or bolt-mounted for signange, flags, etc is Land Improvement - 15 year.

I got this from the Depreciation book of that other publication.

[veritas]

Let's not forget awnings and facades attached to buildings. Five year property.

I

[jimmcg]

I'll vote for five years

[veritas]

I think it is 5 Year Property. See http://www.cpadirect.net/client_serv...cfm?pageid=199 There was a court case with Walgreen's.



Sandy

Good link. This is what I've been trying to tell you all.

However slot machines in a recent case is 7 years.

[S T]

Depreciation Reference Book

Abby,
How do you like the Depreciation Reference Book from the other publication? I have also heard that CCH has a good Depreciation Reference Book, do you know anything about that one.

Sandy

[Black Bart]

Sandy,

I think it is 5 Year Property. See http://www.cpadirect.net/client_serv...cfm?pageid=199 There was a court case with Walgreen's.

Sandy

Here's a quote which I think was issued subsequent to the Walgreen case. It's from a 2002 Income Tax School seminar textbook published by the University of Arkansas Cooperative Extension Service. I don't know if it's meant to be the last word, much less if it's right, just, etc., but it kinda sounds like IRS is doing their usual thing -- take the position most advantageous to them, issue a ruling of their own, stick to it, and slug it out case by case.

CHIEF COUNSEL ADVICE 200203009

In Walgreen Co. and Subsidiaries, TC Memo 1996-374 (1996) the Tax Court determined that ADR Asset Class 57.0 (5-year property) was found to include restaurant decor items such as a decorative canopy system along with its related concrete foundation, concrete piers, lumber, and attached signs. However, in this Field Service Advice, the IRS ruled that outdoor signs must be written off as 15-year land improvements. A casino constructed a large pylon sign on its property to draw attention to its gambling and hotel complex. The sign was not attached to the building. The casino had argued that the entire cost of the sign should be deducted over five years. According to the IRS advice, that treatment applies only to the sign's electronic circuitry.

[veritas]

Here's a quote which I think was issued subsequent to the Walgreen case. It's from a 2002 Income Tax School seminar textbook published by the University of Arkansas Cooperative Extension Service. I don't know if it's meant to be the last word, much less if it's right, just, etc., but it kinda sounds like IRS is doing their usual thing -- take the position most advantageous to them, issue a ruling of their own, stick to it, and slug it out case by case.

CHIEF COUNSEL ADVICE 200203009

In Walgreen Co. and Subsidiaries, TC Memo 1996-374 (1996) the Tax Court determined that ADR Asset Class 57.0 (5-year property) was found to include restaurant decor items such as a decorative canopy system along with its related concrete foundation, concrete piers, lumber, and attached signs. However, in this Field Service Advice, the IRS ruled that outdoor signs must be written off as 15-year land improvements. A casino constructed a large pylon sign on its property to draw attention to its gambling and hotel complex. The sign was not attached to the building. The casino had argued that the entire cost of the sign should be deducted over five years. According to the IRS advice, that treatment applies only to the sign's electronic circuitry.

The tax court in 1975 said that outdoor signs were personal property and qualified for investment tax credit. I guess I'm going with the tax court and not the knottheaded chief counsel. The IRS position was that each case will be considered based on the 1975 standards. So in other words maybe you win maybe you lose so I will default to five year property and bluster any agent like Possi and so I will inevitably win. I think we shall name it the Possi procedure in her honor.

[S T]

More Info on Signage Poles & Pylons

I believe it is as Abby posted, the exterior sign would be 5 years, (possibly 7 years), the pole/post/ pylon would be 15 years. Here is a link to the IRS article for Cost Segregation Audit Techniques http://www.irs.gov/businesses/articl...134180,00.html It lists, Casinos, Restaurant, Retail and Biotech/Pharmaceutical.

Sandy