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(b) Although the drip irrigation system is not permanently
affixed in the ground, it is, for the most part, buried in
trenches or cuts in the ground. Accordingly, the drip irrigation
systems may not be easily removed from the ground, favoring
respondent with respect to this factor.
(c) The well, which is bored deeply into the ground and set
in concrete for almost one-third of its 156-foot length, would be
most difficult to remove from the ground, and, accordingly, this
factor favors respondent.
Final Analysis
In the context of petitioners’ grape-growing and winery
operation there are assets which clearly fit into the category of
permanent improvements.4 One such example would be the winery
building that is permanently affixed to the real property. It is
clear to this Court that petitioners’ well fits within that
category and is no different from other permanent improvements to
the real property and should be included in the 20-year class
life for purposes of depreciation. The six Whiteco
4 The parties made some arguments about the local taxing
authorities’ classification of the assets we consider. Such
classifications, however, are not controlling in matters of
Federal taxation, and we have been guided by the Federal statutes
and case precedent. In addition, petitioners attempted to show
that respondent had not previously questioned petitioners’
depreciation practices; however, there is ample precedent to the
effect that each tax year is considered separately, and the
Commissioner’s failure to question or his informal approval of a
practice in a prior year does not amount to an estoppel.
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Last modified: November 10, 2007