- 6 -
Respondent argues, alternatively, that, if the assets are not
within asset class 46.0, they are within asset class 00.3. Asset
class 00.3 provides for a 15-year recovery period.
We agree with respondent's primary position. The Code lets
taxpayers deduct depreciation for the exhaustion, wear and tear,
or obsolescence of property used in a trade or business. Sec.
167(a); see also Simon v. Commissioner, 103 T.C. 247 (1994),
affd. 68 F.3d 41 (2d Cir. 1995). For tangible property, such a
deduction is computed by reference to the applicable depreciation
method, recovery period, and convention. Sec. 168(a). Under
MACRS, which generally applies to tangible property placed in
service after December 31, 1986, the recovery period depends on
the asset's class life, sec. 168(e), which, for purposes of this
case, is found by reference to Rev. Proc. 87-56, 1987-2 C.B. 674.
See sec. 168(i); see also sec. 167(m)(before repeal). The
classes at issue are as follows:
Asset Class 00.3--Land Improvements: Includes
improvements directly to or added to land, whether such
improvements are section 1245 property or section 1250
property, provided such improvements are depreciable.
Examples of such assets might include sidewalks, roads,
canals, waterways, drainage facilities, sewers * * *.
Does not include land improvements that are explicitly
included in any other class * * *. * * *
Asset Class 13.2--Exploration for and Production
of Petroleum and Natural Gas Deposits: Includes assets
used by petroleum and natural gas producers for
drilling of wells and production of petroleum and
natural gas, including gathering pipelines and related
storage facilities. Also includes petroleum and
natural gas offshore transportation facilities used by
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011