Tax Court Disallows Cost Segregation of Apartment Building Components

In a box exploring a border of acceptable cost separation in depreciable let genuine estate, a Tax Court hold that all though a tiny handful of equipment identified by a building’s owners had to be unheeded over a life of a building (AmeriSouth XXXII, Ltd., T.C. Memo. 2012-67).

AmeriSouth, a singular partnership, bought an unit formidable in 2003 for $10.25 million. AmeriSouth consecrated a cost-segregation investigate and afterwards attempted to decrease some-more than 1,000 building components over five- or 15-year spans, instead of a 27.5 years germane to let genuine estate underneath MACRS. Using a cost-segregation method, AmeriSouth deducted $3,029,029 for debasement in a years 2003–2005.

The IRS audited a partnership underneath TEFRA and disagreed with AmeriSouth’s diagnosis of a components; it denied $1,079,751 in deductions for those years. The box finished adult in Tax Court, where a IRS also argued that AmeriSouth was attempting to decrease some resources it did not own.

About a time a box was tried, AmeriSouth sole a unit formidable and subsequently stopped responding to communications from a court, a IRS, and even a possess attorneys. The justice authorised a attorneys to repel from a case. When AmeriSouth unsuccessful to record a post-trial brief, a justice could have discharged a box entirely, though instead it motionless a case, deeming any significant matters not contested to be conceded by AmeriSouth.

The justice looked in abyss during a components in any of a 12 categories AmeriSouth had identified for faster depreciation: site credentials and earthwork; H2O placement system; sanitary-sewer system; gas line; site electric; special HVAC; special plumbing; special electric; finish carpentry; millwork; interior windows and mirrors; and special painting.

Based on a hearing of a facts, a justice sided with a IRS in all though a tiny handful of instances, holding that many components were constructional components, constituent to a buildings’ operation and maintenance, and therefore depreciable over a life of a building.

The usually components AmeriSouth won on were garments dryer vents; embankment components; outlets and timers relating to watering of a grounds; notice components (camera and TV); refrigerator, stove, and washer/dryer outlets; and cable, telephone, and information outlets.

About Emil Estafanous, CPA
Certified Public Accountant (CPA) Tax Professional committed in representing taxpayers and resolving their tax problems.

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