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a method of depreciation that "fragments an item of property,
often a building, into its elements (e.g., shell, plumbing, and
wiring) and applies individual useful lives and salvage values to
each such component." Westin, Lexicon of Tax Terminology 127
(1984); see also Shainberg v. Commissioner, 33 T.C. 241 (1959);
sec. 1.167-7, Income Tax Regs.
Accordingly, the parties agree that the disputed property
items placed in service during 1985 and 1986 constitute 5-year
property, as petitioners contend, only if the items constitute
section 1245 class property, and do not constitute structural
components of section 1250 class property, as respondent contends
they do.
MACRS
MACRS provides that the "depreciation deduction provided by
section 167(a) for any tangible property shall be determined by
using--(1) the applicable depreciation method, (2) the applicable
recovery period, and (3) the applicable convention." Sec.
168(a). For purposes of the general depreciation system, which
is involved in the instant case, MACRS generally classifies
25 (...continued)
* * * * * * *
(C) Exception for substantial improvements.--
(i) In general. For purposes of this
paragraph, a substantial improvement shall be
treated as a separate building.
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