Real property leased to retail motor fuel outlet owner qualifies as 15-year property.

• Author: Lindbloom, John W.
• Position: Brief Article

The IRS recently issued Rev. Rul. 97-29, which holds that real property leased to an operator of a retail motor fuel outlet met the definition of a retail motor fuel outlet and, therefore, must be treated as 15-year property. Sec. 168(e)(3)(E) provides for a 15-year life for a motor fuel outlet. The rationale of the ruling hinges on an interpretation that there is no distinction between the owner of a retail motor fuel outlet who also happens to operate the business and an owner who does not operate the business. The ruling, therefore, states that the use of the property determines the depreciable life.

The IRS went on to state that, to apply the applicable 50% gross revenue test, the owner of the building must aggregate the gross revenues of all...