Classifying sec. 1250 property.

• Author: Howe, Vicki
• Position: Brief Article

Taxpayers that place "real property" in service during the tax year must determine which recovery period is applicable. Currently, the rules for Sec. 1250 property (generally, real estate) are that commercial realty is depreciated over 39 years and residential realty is depreciated over 27.5 years. However, some Sec. 1250 property is depreciated over shorter periods. Although Rev. Proc. 87-56 primarily provides class lives and recovery periods for Sec. 1245 property (generally, personal property), it also provides class lives and recovery periods for certain Sec. 1250 property. For example, service station buildings are depreciated over a 15-year recovery period under Asset Class 57.1.

A recent case, Walgreen, 103 TC No. 33...