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Respondent argues that in order for Rev. Proc. 87-56, sec.
5.05, to apply, the “irrigation system must be a structure that
is essentially an item of machinery and equipment, and there is
equipment to which the structure is related from which we can
determine the appropriate asset guideline class.” We agree with
respondent. Because this Court has already decided that
grapevines are permanent improvements to land and/or not tangible
personal property, petitioners’ alternative argument must fail.
Accordingly, we hold that respondent’s adjustments are
sustained with respect to the irrigation systems and the well.
Conversely, we hold that the trellising is not a permanent land
improvement and that respondent’s determination with respect to
the trellising is in error.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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Last modified: November 10, 2007