Truckstops fail floor-space test for 15-year recovery period.

• Author: O'Driscoll, David

[L] operates multi-building truckstops in Iowa and Missouri. The IRS categorized them as retail convenience stores, depreciable over 30 years. L chimed that they were "retail motor fuels outlets" eligible for a more favorable 15-year depreciation period. However, the district court concluded that L's truckstop buildings did not meet the floor-space test, which requires that 50% or more of the floor space be devoted to petroleum marketing sales, after it excluded floor space for a movie theater, arcade, showers, laundromat and TV lounge on the second floor of the Iowa truckstop and a game room, showers and TV lounge in the Missouri building. L appealed to the Eighth Circuit.

Analysis

Sec. 168(e)(3)(E)(iii) allows 15-year depreciation for a retail motor fuels outlet (regardless of whether food or other convenience items are sold at the outlet). The determination of whether a facility is a retail motor furls outlet used in the marketing of petroleum and petroleum products is made using either a gross revenues test or the floor-space test. According to an IRS Coordinated Issue Paper on Convenience Stores (March 1, 1995)(CIP), a building meets the floor-space test when 50% or more of the floor space in its property is devoted to petroleum marketing sales.

Congress directed that the floor-space test be determined pursuant to the CIP; see S Rep't No. 104-281, 104th Cong., 2d Sess. (1996). The CIP flamed the issue as whether gas station convenience store (C-Store) buildings and truckstops are included in Asset Class 57.1. However, the CIP neither describes typical truckstop features nor how to calculate truckstop floor space. Instead, it only discusses how C-Store buildings are structured and treated under Asset Class 57.1. Features such as counters used for the sale of gasoline dispensed from pump islands and automobile supplies (such as oil, anti-freeze and window-washer fluid) are devoted to the marketing of petroleum products. Areas not devoted to the marketing of petroleum products include the office area, storage, restrooms, food preparation area, walk-in cooler, general sales areas and, in some cases, customer seating. Structures primarily used to sell convenience items and not to market petroleum products would also be excluded.

Services-Comparison Standard

The CIP compares the services or goods provided at a structure with other similar markets to determine the status of the structure under Asset Class 57.1. It conceives a traditional...