What are the IRS guidelines for class life of carpeting installed in a commercial office building under Section 179(d)(5)(B)?
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The IRS guidelines for determining the class life of carpeting installed in a commercial office building, for purposes of Section 179(d)(5)(B), are as follows:
1. Classification of Carpeting as Section 1245 Property
- Under Section 179(d)(1), property eligible for Section 179 expensing includes tangible personal property to which Section 168 applies and which is Section 1245 property (as defined in Section 1245(a)(3)).
- Carpeting, when installed in a commercial office building, is generally considered tangible personal property and not a structural component of the building. It is not treated as a building or structural component under the regulations, and is therefore Section 1245 property.
3. Special Rule for Carpeting
- However, IRS guidance and cost segregation audit technique guides clarify that carpeting, when installed in a commercial office building, is treated as 5-year property for MACRS purposes, not 7-year property, because it is considered tangible personal property and not a structural component. This is supported by IRS Publication 946 and the Cost Segregation Audit Technique Guide, which state that carpeting is 5-year property under MACRS.
4. Section 179(d)(5)(B) and Class Life
- Section 179(d)(5)(B) provides that, for purposes of the $25,000 limitation on SUVs, the term "sport utility vehicle" does not include any vehicle which is not subject to Section 280F and which is rated at not more than 14,000 pounds gross vehicle weight. However, for purposes of Section 179 expensing, the class life of property is determined by reference to the asset classes in Rev. Proc. 87-56.
5. Conclusion
- For Section 179 purposes, the class life of carpeting installed in a commercial office building is 5 years. This means carpeting is eligible for Section 179 expensing, and its class life is 5 years for purposes of Section 179(d)(5)(B) and for MACRS depreciation.
6. Summary Table Reference:
- Asset Class: 00.11 (Office Furniture, Fixtures, and Equipment)
- Description: Includes carpeting used in rental property and commercial buildings
- Class Life: 10 years (per Table B-1), but for MACRS and Section 179, carpeting is treated as 5-year property
- GDS Recovery Period: 5 years- ADS Recovery Period: 5 years
Key IRS Sources:
- IRS Publication 946, Table B-1 and Table B-2- Cost Segregation Audit Technique Guide, Chapter 7 (Retail, Office, and Other Commercial Buildings)- Rev. Proc. 87-56, Asset Class 00.11
Practical Application:
- Carpeting installed in a commercial office building is classified as 5-year property for Section 179 and MACRS purposes, and this is the class life to use under Section 179(d)(5)(B).
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