Southwestern 2013 Research 8-1

Southwestern 2013 Research 8-1

Part 1

Harry Pickart
P. O. Box 100
Sun River, OR 97600
Dear Harry,
After reviewing the information you provided to me, I advise you that the aircraft parts should be depreciated based on 5-year cost recovery rules.   Revenue Procedure 87-56, 1987-2 C.B. 674, which is reproduced as "Table B" in IRS Publication 946, classifies your property as an Asset Class 00.21, and as such, they will be subject to the 5-year MACRS schedule of depreciation.
If you have any further questions, feel free to contact me.

Sincerely,


Part 2

RE: Harry Pickart (Tax Year 2011)
Facts:
Harry Pickart has qualified property, IRC § 167(a), consisting of used aircraft parts which he rents to movie studios. He estimates that the useful life of the parts is less than four years because of the wear and tear while they are being used by the movie studios. Therefore, he believes the cost recovery period is three years.
Issue:
Determination of the asset class and cost recovery rules for airplane parts to establish the correct MACRS depreciation schedule.
Conclusion:
The aircraft parts should be classed as five-year recovery property, per Table B, IRS Publication 946, 00.21, as defined by Rev. Proc. 87-56, 1987-2 C.B. 674.
Analysis:
From Rev. Proc. 87-56, classifying an asset according to the business activity in which the asset is primarily used, the Tax Court held that the useful life of a particular asset is not controlling in determining the applicable recovery period under 168, as in the case of Mark Thomson, 78 TCM 768, T.C. Memo. 1999-371.

View Full Essay