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1984-532, where the court declared: “The fact that an item is
not readily reusable in another location certainly is evidence
supporting the conclusion that it is to be treated as permanent
in its present location.” Accordingly, we hold that the well and
drip irrigation systems are permanent improvements to the real
property.
Petitioners, as an alternative, argue that if the trellises
or irrigation systems are land improvements, they come within the
exception of section of Rev. Proc. 87-56, sec. 5.05, 1987-2 C.B.
at 676. Because we have decided that petitioners’ irrigation
systems are, in the context of this case, land improvements, we
consider petitioners’ argument.
To the extent pertinent, section 5.05 of Rev. Proc. 87-56,
1987-2 C.B. at 676, contains the following special rules
incorporated from Rev. Proc. 83-35, sec. 2.02, 1983-1 C.B. at
745:
"Land Improvements," includes "other tangible property"
that qualifies under section 1.48-1(d) of the Income
Tax Regulations. However, a structure that is
essentially an item of machinery or equipment or a
structure that houses property used as an integral part
of an activity specified in section 48(a)(1)(B)(i) of
the Code, if the use of the structure is so closely
related to the use of the property that the structure
clearly can be expected to be replaced when the
property it initially houses is replaced, is included
in the asset guideline class appropriate to the
equipment to which it is related.
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