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Indus., Inc. v. Commissioner, supra, factors serve to verify and
support this result.
At the other end of the spectrum of assets used in
petitioners’ grape-growing operation, a tractor would be an
example of machinery and equipment that is not a permanent
improvement to land so as to classify it within the 10-year class
life for purposes of depreciation. The trellising and drip
irrigation systems fall somewhere between permanent buildings and
farm machinery, such as tractors, and in some ways are intended
to have permanence and in other ways do not. The component parts
of trellising and drip irrigation systems are personal property
before they are configured and placed in or on the ground. By
themselves, the posts, stakes, wire, pipe, and tubing are all
personal property and could not be considered a “permanent land
improvement”. It is the manner in which they are combined and/or
affixed in the ground that changes their classification from
personal to “real property”.
There is no bright-line test by which such assets could be
readily classified as always being permanent land improvements or
farm machinery or equipment. For example, an above-ground
irrigation system would more likely be classified as machinery or
equipment, whereas one buried in the ground would more likely be
classified as a permanent land improvement. In each instance of
an asset that is not clearly in one category or another, we must
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Last modified: November 10, 2007