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1、学海无涯Depreciation of Modular BuildingsWhile there is no specific IRS ruling pertaining to depreciation of modular buildings, the following are intended to be general guidelines:1) Always consult a professional tax advisor2) Visit the IRS Website for additional resources:http:/www.irs.gov/publications
2、/p946/index.html3) The determination as to which depreciation recovery period to apply to the building is based upon whether the property is considered real or personal.4) Generally speaking, the buildings (modular units) alone do qualify for a faster depreciation than real property. However, once a
3、ffixed to a foundation, the decision as to whether the property is real or personal (temporary or permanent) falls within the jurisdiction of the local code official.To help determine if a property is considered real (permanent, not intended to be moved), consider the following:The question of real
4、vs. personal can be answered by both investigating the original building design and a term called inherent permanency. Inherent permanency is a definition that addresses the question of Is this structure designed and intended for permanent use? This issue is relevant, as nearly any structure can be
5、moved. To the extreme end of that scale, the London Bridge was moved to Arizona - but certainly no one will say that this represents relocatability. The question of inherent permanence asks at what point can you consider a structure easily movable and when is it not easily relocatable or reasonably
6、achievable.Utilizing the six-way test that was established in the Federal court cases of Whiteco and further used extensively in the Fox Photo case (a modular commercial structure), the courts recommend that it be viewed under the 6 way test as established in the Whiteco case:1. Is the property capa
7、ble of being moved and has it in fact been moved?To facilitate off-site construction, modular construction requires the manufacture and transport of sectional units from the factory to another site where they will be connected together. The practice of assembly and disassembly of modular units is an
8、 everyday industry occurrence. The modular units are designed to be legally transported form the factory over the public highway before use, therefore, reuse after disassembly is commonplace in practice and intended. Further, under contractual obligation, typically the structure must be removed at t
9、he termination of the contract of when needed. This most likely will not be the case for on-site constructed facilities.2. Is the property designed or constructed to remain permanently in place?Non-residential modular construction typically is designed and manufactured to be readily relocatable. Fou
10、ndation systems that are used by modular structures are a function of compliance with locally prescribed model construction codes to support the structure. Depending on the prevailing local construction codes, foundation systems, not the structure, may or may not be sedentary or appear to be permane
11、nt.For buildings leased, the term of the average original operating lease contract is, typically less than five years. At the termination of the lease, the structure must be removed from the site, relocated, and then would be utilized at another site.Since the structures modular units are initially
12、intrinsically designed to be transported for highway movement from the factory to the first site, these structural units maintain their transportability for secondary, and subsequent moves. For these secondary moves, the act of disassembly typically does not substantially damage these sectional modu
13、lar units. Additionally, it is common that once the modular units are removed, many of these units may be inventoried, re-configured, and reused at other sites.3. Are there circumstances that show that the property may or will be moved?The term of the lease or the use of the structure dictates the r
14、emoval of the modular sections. At the termination of the lease or use, lessor or user is required to disassemble and transport each of the modular section to another site or return to inventory for re-use at a later time.Since these structure are initially constructed in a remote factory, this desi
15、gn allows an industry-wide marketing application of short use of the structure in one location and the ready relocation to another site. This practice is prevalent in the educational, office, airport, institutional, restaurant, correctional, and medical facilities markets to name but a few.Since the
16、se structures have been transported over public highways at least once, the ability exists universally to disassemble and re-transport sectional units with minimal costs for permits and transit. The fees to obtain local disassembly permits are nominal in cost as well.4. How substantial a job is removal of the property, and how time consuming?The job of removing the modular sections of the structures is facilitated by the very init
