Facts: The owner of an apartment complex claimed individual depreciation deductions on components of the complex’s improvements, including sinks, outlets, paint, pipes, lights and electrical wiring.
Claim: The owner itemized the components as tangible personal property, which is not integral to the building’s operation and maintenance.
Counter claim: The Internal Revenue Service (IRS) denied the owner’s component depreciation deductions, claiming the separate components the owner listed as non-integral to the building’s operation and maintenance were structural components of the building, and must be depreciated on the applicable 27.5-year standard depreciation schedule (SDS).
Holding: A federal tax court held the owner must use the 27.5-year SDS for depreciation deductions of the components of his improvements since the components were not tangible personal property separate from the operation or maintenance of the building.
Also at issue in this case:
Facts: Utility lines were installed at an apartment complex. The owner claimed depreciation deductions on the utility lines.
Claim: The Internal Revenue Service (IRS) denied the owner’s depreciation deductions, claiming the owner cannot depreciate the utility lines as the city pays for repairs of the utility lines, not the owner.
Counter claim: The owner claimed he is entitled to recover the cost paid for the installation of the utility lines.
Holding: A federal tax court held the owner cannot separately depreciate the utility lines as a separate component of his cost basis since the owner does not bear the cost for maintaining them. [AmeriSouth v. Commissioner of Internal Revenue (March 12, 2012) _ TC _]
