Storage Building

[barzillai]

Client bought a storage building for his place of business. He keeps the lawn mower, etc. in it. Previous preparer counted it as 15 year property. My research tells me this isn't correct, as it isn't a land improvement. However, is it 39 year property? Or could it be counted maybe as 20 year property? It is not used for agriculture and was brought in on a truck and placed on the ground. It is definitely not a permanent structure, and could be moved again at any time. Thanks!

[barzillai]

I just found a previous discussion on this topic from 2006. That discussion focused on whether Sec. 179 would be available. Section 179 is not an option here. I need to know the proper recovery period. Thanks!

[Snaggletooth]

Land Improvements

Barzilli, this is my opinion only, but I think this thing you describe is best categorized as a land improvement, and 15 years is proper. Definitely not 39 year stuff.

Movable structures such as you describe are more often than not made permanent by affixing them to a foundation of sorts. Failing to affix them would not change the nature of the structure as purchased...

[erchess]

Another consideration

I know that there is even a form for changing depreciation method now but I still go by what I was taught long ago, which was that if you change depreciation you might as well write to the Commissioner of Internal Revenue suggesting that the client be audited because no one involved is sure what has been happening is right.. The service at least used to rarely question depreciation unless you went outrageously fast because the bottom line is that all a taxpayer is going to do is recover the cost of the asset and in the great scheme of things whether this happens in five seven or fifteen years matters little.

[Davc]

It is not a land improvement. If there is a concrete pad on which it sits, then that may be a land improvement depending on whether or not the shed itself is 1250 or 1245. If 1250, then then shed and pad are one unit at 39 years. Below is from BNA on ter criteria used to determine the classification of the shed:

b. “Inherently Permanent” Versus “Not Inherently Permanent” Structures
In Whiteco Industries, Inc. v. Comr., 554 the Tax Court indicated that affixation to land does not necessarily demonstrate that a structure is inherently permanent and does not preclude property from being “tangible personal property.” Citing other cases, the Tax Court listed the following factors in determining whether property is inherently permanent:
554 65 T.C. 664 (1975), acq., 1980-2 C.B. 2.
(1) Is the property capable of being moved and has it been moved?
(2) Is the property designed or constructed to remain permanently in place?
(3) Are there circumstances showing that the property may have to be moved?
(4) Is the property “readily” removable?
(5) How much damage will the property sustain upon removal?
(6) What is the manner in which the property is affixed to the land?
Applying these criteria in Whiteco, the Tax Court held that billboards (outdoor advertising signs) constituted tangible personal §1245 property. 555 Before Whiteco, the IRS had ruled that billboards and signs were inherently permanent structures. 556 In Rev. Rul. 80-151, 557 the IRS noted its acquiescence in Whiteco and reversed its prior position. The ruling sets forth examples that illustrate how the IRS will apply the criteria in Whiteco in determining whether outdoor advertising displays are inherently permanent structures or tangible personal property.

[ChEAr$]

Portable building

If it is such, then 7 years and section 179 available.

Of course portable buildings are not anchored, either to ground or a concrete pad,
making them personal property. However always look to local law on that subject.

[Davc]

Disagree.

From the case mentioned above:

"Thus, although under State law, fixation to the land is a basis for distinguishing personal property from other property, such basis is not to be relied upon for purposes of deciding what property may qualify for the investment credit. "