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Lane
Lane, CFP, MBA, CRPS
Category: Tax
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Experience:  Providing Financial & Tax advice since 1986
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I have a depreciation question and Ive done a ton of research

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I have a depreciation question and I've done a ton of research and I'm just not sure. I have a client who purchased a block plant (Columbia 16HR Block Plant). This block plant creates cement blocks that go into building houses. And I'm trying to figure out the class life of the block plant. It was not new when purchased. One part of the block plant was made in 1996 and one part was made in 1987. It was purchased by my client on 3/23/2012. The research I've found in Rev Proc 87-56 leads me to believe I can depreciate it over 7 years. See Sec 6 paragraph 32.3. But I'm not sure because it also says class life of 15, general depreciation system 7, and alternative depreciation system 15. But the plant it self is already at least 16 years old. The cost of the plant is $200,000. So a 7 year life would be a substantial deduction and I want to be sure. Can you provide any insight as to what class life I should use? Bonus will be added if you can provide additional documentation to prove what class life I should use.
Submitted: 7 months ago.
Category: Tax
Expert:  Lane replied 7 months ago.

Lane :

Hi, according to 87-56, I see two possibilities ....

Lane :

  • Assets used in the manufacture of cement, not including assets used in the manufacture of concrete (asset class 32.2), use a 15-year recovery period;

  • Assets used in the manufacture of other stone and clay products, including assets used in the manufacture of concrete (asset class 32.3), use a 7-year recovery period.

Lane :

Further it DOES say, that assets that do not fit into one of the listed asset classes are given a 7-year recovery period

Lane :

Have you tried talking to one of the technical service reps at Conumbia?

Lane :

I can given them a call if you'd like .... what this will come down to, if you're challenged ,will probably be what's been allowed/being used by other users of the plant

Lane :

Hi Shannon, I just spoke with someone at Columbia, and they don't have a clue OTHER THAN, telling me that they will do re-builds in the field... and that the R in the model number tells us that its a re-build

Lane :

I think that the 7 year fits ... and if the 200,000 number is XXXXX buyer's cost (your client's cost) that's what you use.

Customer:

Thank you. It's definitely not 32.2 because we're create concrete products . I was hoping for additional documentation, but I think what I found in the research is all I have to go on.

Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3157
Experience: Providing Financial & Tax advice since 1986
Lane and 5 other Tax Specialists are ready to help you
Expert:  Lane replied 7 months ago.

Then that only leaves 32.3.

I think you're there.

Thanks
Lane

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