As much as 95% of interior partitions and non-load-bearing walls are misclassified as short-life property. The IRS has guidelines as to when these assets may be considered personal property. Has your cost segregation specialist given you the right advice? Have they set you up for a fall?
The IRS Guidelines for Non-load-bearing Walls
Partitions or other non-load-bearing walls must meet the two criteria set forth by the Internal Revenue Service to be considered short-life:
- You must show that you are re-using and storing the removed material for later use. The property owner can not be considering planning to re-use the walls, but must in fact actually be reusing the parts and storing them;
- You must show that it is economically sensible to make this decision. Storage and removal costs should calculate as more economical than tearing out and building new.
Unless both of these criteria are met, owners may not consider the interior non-load-bearing walls as personal property. They should be classified as long-life property and depreciated over 39 years.
Trust Your Tax Reduction Strategies to O’Connor & Associates. Our team of real estate advisors and commercial appraisers work with you or your tax professional to research and properly identify all aspects of your building in complete alignment with IRS guidelines and regulations. The result is greater depreciation and a significant reduction of federal income taxes.
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Or, call Roger Hibbs at 1-877-375-4291.