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court case
Tax Ct. Docket No. 38852-87
Doc 1989-1288
Decided: February 14, 1989
Cite(s): T.C. Memo 1989-66
56 T.C.M. 1242
Judge(s): Couvillion, opinion
Principal Code Section Reference(s): Section 168
Summary
Provided by Tax Analysts. Copyright 2006 Tax Analysts. All rights reserved.
CONVERSION OF GARAGE TO DENTIST OFFICE NETS NO ITC; OFFICE FURNISHINGS MUST BE DEPRECIATED OVER FIFTEEN YEARS.
Joe Miller retired from the United States Air Force and set up practice as a dentist in Dripping Springs, Tex. Miller bought a house with a detached garage, which he had renovated and enlarged for his business. He paid nearly $6,000 for a septic tank system that served his home and the office. He also paid $36,800 to have the garage turned into a dental office, complete with furnishings. Miller claimed an investment tax credit (ITC) for the sewage system. He classified the sewage system and the office furnishings and attachments as five-year property for depreciation purposes.
The Service determined a deficiency, asserting that the sewage system was not tangible personal property eligible for the ITC. It also asserted that the system was 15-year property for depreciation purposes and was not depreciable to the extent of its use in serving Miller's residence. The Service charged that the cabinets, benches, shelves, and other attachments in Miller's office should be depreciated over the course of 15 years. Miller petitioned the Tax Court, arguing that the septic tank system constituted tangible personal property since it could be moved. Even if it were not section 38 property, Miller argued, it should be treated as five-year property since the local government may require attachment to a central sewage system within five years. He also argued that the office furnishings deserve five-year depreciation.
Tax Court Special Trial Judge Couvillion has held that the sewage system is not tangible personal property. The court cited Everhart v. Commissioner, 61 T.C. 328 (1973). The court ruled that the septic tank system is permanent and subject to 15-year depreciation. Citing Miller's lack of documentation and the nature of the office components, Judge Couvillion held that Miller is entitled to five-year depreciation of cabinets and benches. The court sustained the Service's determination that the remainder of the office assets should be depreciated over 15 years.
Tax Ct. Docket No. 38852-87
Doc 1989-1288
Decided: February 14, 1989
Cite(s): T.C. Memo 1989-66
56 T.C.M. 1242
Judge(s): Couvillion, opinion
Principal Code Section Reference(s): Section 168
Summary
Provided by Tax Analysts. Copyright 2006 Tax Analysts. All rights reserved.
CONVERSION OF GARAGE TO DENTIST OFFICE NETS NO ITC; OFFICE FURNISHINGS MUST BE DEPRECIATED OVER FIFTEEN YEARS.
Joe Miller retired from the United States Air Force and set up practice as a dentist in Dripping Springs, Tex. Miller bought a house with a detached garage, which he had renovated and enlarged for his business. He paid nearly $6,000 for a septic tank system that served his home and the office. He also paid $36,800 to have the garage turned into a dental office, complete with furnishings. Miller claimed an investment tax credit (ITC) for the sewage system. He classified the sewage system and the office furnishings and attachments as five-year property for depreciation purposes.
The Service determined a deficiency, asserting that the sewage system was not tangible personal property eligible for the ITC. It also asserted that the system was 15-year property for depreciation purposes and was not depreciable to the extent of its use in serving Miller's residence. The Service charged that the cabinets, benches, shelves, and other attachments in Miller's office should be depreciated over the course of 15 years. Miller petitioned the Tax Court, arguing that the septic tank system constituted tangible personal property since it could be moved. Even if it were not section 38 property, Miller argued, it should be treated as five-year property since the local government may require attachment to a central sewage system within five years. He also argued that the office furnishings deserve five-year depreciation.
Tax Court Special Trial Judge Couvillion has held that the sewage system is not tangible personal property. The court cited Everhart v. Commissioner, 61 T.C. 328 (1973). The court ruled that the septic tank system is permanent and subject to 15-year depreciation. Citing Miller's lack of documentation and the nature of the office components, Judge Couvillion held that Miller is entitled to five-year depreciation of cabinets and benches. The court sustained the Service's determination that the remainder of the office assets should be depreciated over 15 years.
