Cost Segregation ATG - Chapter 6.4 Relevant Court Cases

Note: Each chapter in this Audit Techniques Guide (ATG) can be printed individually. Please follow the links at the beginning or end of this chapter to return to either the previous chapter or the Table of Contents or to proceed to the next chapter. Chapter 6.3 | Table of Contents | Chapter 6.5 APPENDIX - CHAPTER 6.4 - RELEVANT COURT CASES INTRODUCTION This chapter is intended to assist examiners in determining whether certain assets constitute § 1245 or § 1250 property. In addition to the legal framework presented in Chapter 2, the court cases listed below provide further guidance. Although the issue in many of the cited cases below relates to ITC, these cases remain important in determining whether property constitutes § 1245 property for purposes of ACRS and constitutes tangible personal property for purposes of MACRS. Hospital Corporation of America and Subsidiaries v. Commissioner, 109 T.C. 21, 54-55 (1997), acq. on this issue and nonacq. on other issues, 1999-2 C.B. xvi. Unfortunately, there are no bright-line tests for distinguishing § 1245 property from § 1250 property. All of the cases are factually intensive and quite often the opinions of the courts conflict. Therefore, the examiner’s ultimate determination generally cannot be based merely upon reading one case. In addition to reading all the cases on point, the Service’s position must be reviewed and followed; as well, the examiner must also consider whether the Service has acquiesced to a particular position or case. ARRANGEMENT OF INFORMATION This chapter contains three attachments to assist examiners in locating pertinent cases that address specific assets: Case Citations for the Relevant Court Cases; Table by Case Name (Asset Descriptions by §§ 1245/1250 determinations); and Table by CSI Master Format Division (Case Name & Asset Description by §§ 1245/1250 determinations) back to the top CASE CITATIONS AC Monk A.C. Monk & Co. v. United States, No. 78-126-CIV-4, 1981 U.S. Dist. LEXIS 17764 (E.D.N.C. Mar. 30, 1981), aff’d in part, rev’d in part, vacated and rem’d, 686 F.2d 1058 (4th Cir. 1982), on remand, 577 F. Supp. 4 (E.D.N.C. 1983). Albertson’s Albertson’s v. Commissioner, 94-1 U.S. Tax Cas. (CCH) P50,016; 73 A.F.T.R.2nd (RIA) 558 (9th Cir. 1993); rev’g. 95 T.C. 415 (1990). Bod-Nol Boddie-Noelle Enters. v. United States, 96-2 USTC ¶ 50,627 (Fed. Cl. 1996), aff’d without published opinion, 132 F. 3d 54 (Fed. Cir. 1997). Centr Citrus Central Citrus Co. v. Commissioner, 58 T.C. 365 (1972). Circle K Circle K Corp. v. Commissioner, T.C. Memo. 1982-298. Cons Freight Consolidated Freightways, Inc. v. Commissioner, 74 T. C. 768 (1980), aff’d in part and rev’d in part, 708 F.2d 1385 (9th Cir. 1983). Consolidated Freightways, Inc. v. United States, 79-2 USTC ¶ 9440 (Ct. Cl. 1979). Consolidated Freightways, Inc. v. United States, 620 F.2d 862 (Ct. Cl. 1980). Dixie Man Dixie Manor, Inc. v. United States, 79-2 USTC ¶ 9469 (W.D. Ky. 1979), aff’d, 81-1 USTC 9332 (6th Cir. 1981). Duaine Duaine v. Commissioner, T.C. Memo. 1985-39. Grinalds Grinalds v. Commissioner, T.C. Memo. 1993-66. HCA Hospital Corp. of Am. & Subs. v. Commissioner, 109 T. C. 21 (1997), acq. in part and nonacq. in part, 1999-2 C.B. xvi. Ill Cereal Illinois Cereal Mills, Inc. v. Commissioner, T.C. Memo. 1983-469, aff’d, 789 F.2d 1234 (7th Cir. 1986), cert. denied, 479 U.S. 995 (1986). King Radio King Radio Corp. v. United States, 486 F.2d 1091 (10th Cir. 1973), aff’g D.C. No. KC-3320). La Petite La Petite Academy v. United States, 95-1 USTC ¶ 50,193 (W.D. Mo. 1995), aff’d in unpublished opinion, 72 F.3d 133 (8th Cir. 1995). LL Bean L.L. Bean, Inc. v. Commissioner, T.C. Memo. 1997-175, aff’d, 145 F.3d 53 (1st Cir. 1998). Mallinckrodt Mallinckrodt, Inc. v. Commissioner, T.C. Memo. 1984-532, aff’d, 778 F.2d 402 (8th Cir. 1985). McManus McManus v. United States, 700 F. Supp. 994 (W.D. Wis. 1987), aff’d, 863 F.2d 491 (7th Cir. 1988). Metro Metro Nat’l Corp. v. Commissioner, T.C. Memo. 1987-38. Minot Fed Minot Fed. Sav. & Loan Ass’n v. United States, 313 F. Supp. 294 (D.N.D. 1970), aff’d, 435 F.2d 1368 (8th Cir. 1970). Morrison Morrison, Inc. v. Commissioner, T.C. Memo. 1986-129, aff’d, 891 F.2d 857 (11th Cir. 1990). Munford Munford, Inc. v. Commissioner, 87 T.C. 463 (1986), aff’d, 849 F.2d 1398 (11th Cir. 1988). Piggly Wiggly Piggly Wiggly Southern, Inc. v. Commissioner, 84 T.C. 739 (1985), aff’d, 803 F.2d 1572 (11th Cir. 1986), nonacq., 1988-2 C.B. 1. Publix Publix Supermarkets, Inc. v. United States, 92-1 USTC ¶ 50,240 (Cl. Ct. 1992). Schrum Schrum v. Commissioner, T.C. Memo. 1993-124, aff’d in part and vacated in part, rem’d, 33 F.3d 426 (4th Cir. 1994), on remand, T.C. Memo. 1995-103, aff’d in part and vacated in part without published opinion, 114 F.3d 1177 (4th Cir. 1997). Scott Paper Scott Paper Co. v. Commissioner, 74 T.C. 137 (1980). Shoney’s Shoney’s South, Inc. v. Commissioner, T.C. Memo. 1984-413, action on dec., 1986-048 (September 19, 1986). TI Texas Instruments Inc. v. Commissioner, T.C. Memo. 1992-306. back to the top Walgreen Walgreen Co. & Subs. v. Commissioner, 103 T.C. 582 (1994), rev’d, rem’d, 68 F.3d 1006 (7th Cir. 1995), supplemental op., T.C. Memo. 1996-374. Westroads Westroads, Inc. v. Commissioner, 69 T.C. 682 (1978), acq., 1979-2 C.B. 2. Whiteco Whiteco Industries, Inc. v. Commissioner, 65 T.C. 664 (1975), acq., 1980-2 C.B. 2. TABLE BY CASE NAME Case Name Master Format Division Asset Description 1245 1250     AC Monk 15700 Louvered Wall to Boiler X     03000 Truck Apron X     10800 Lavatory Furnishings   X   15300 Fire Hose Stations   X   13120 Special Rooms X     13120 Storage Sheds X     16400 Elec. Dist. to lights & machines   X   03000 Concrete RR dock   X   13030 Green storage room   X Albertson’s 15700 HVAC system   X   05100 Raised roof   X Bod-Nol 09500 Suspended Ceilings   X   06170 Ext. Mansard-Marlite roof panels   X   16400 Electrical to equipment   X   15400 Plumbing to equipment   X   15700 Kitchen HVAC   X   08830 Decorative Mirror   X   08582 Carousel drive-up window unit   X Centr Citrus 15700 Blowers X     15700 Coolers X     16400 Elec. dead front panel   X   16300 Elec. Transformer to facilities   X   16400 Elec. Gutter plus ends & cutting X     16400 Elec. Dist: adapters/relays/fuse X     16140 30 amp. Switch X     16300 Elec. Transformer for sweet rm X     16140 Elec. Outlets X X   16510 Fluorescent fixtures X X   16510 Spotlight and flood lamps X X   16510 Moisture-proof lamps X     16300 Elec. Transformer for damper X     16510 Ballast lights X   Circle K 13030 Cold storage rm.   X   15700 Air conditioning units (roof)   X Cons Freight 03000 Raised concrete loading dock   X   08330 Overhead doors   X   16510 Light fixtures - mercury vapor   X   02825 Dock fence X   Dixie Man 15700 Air conditioning/Heating (roof)   X   09250 Rm partition (drywall/wood stud)   X Duaine 03100 Concrete slab behind counter   X   09300 Floor tile   X   09300 Wall tile   X   15100 Water lines to cooking table,etc X     15100 Gas lines to cooking elements X     15100 Connecting fixtures to appliance X     15100 Copper drain lines from refrig. X     16510 Ornamental light fixtures   X   16140 Elec. Outlets to equip. X                       Grinalds 15700 Air conditioning units   X   09250 Partitions (cubical type)   X   09250 Walls (interior)   X   10800 Walls (restroom)   X   15400 Plumbing – restroom   X   16200 Elec. Conduit & Recep. – Restrm   X HCA 16300 Primary & secondary elec. dist. X X   16400 Branch elec. dist. X X   16200 Branch elec. – TV equip. X     16700 Telephone wiring, jacks X     16200 Elec. Wiring – inter-com equip. X     09680 Carpeting X     09720 Vinyl wall covering X     09600 Vinyl wall covering X     15400 Kitchen water pipe, grease trap X     15400 Plumbing for x-ray X     15850 Kitchen hood & exhaust sys. X     05720 Patient corridor handrails X     16510 Over-bed recessed lights   X   10650 Accordion doors/partitions X     10800 Bathroom acces., plastic mirrors   X   09510 Acoustical ceiling tile   X   15510 Steam boilers & acces.   X Ill Cereal 16400 Elec. Distribution system (95%) X   King Radio 10630 Partitions (ceiling height) X     10630 Glazed partitions X     10630 Movable partition sys. X   LL Bean 13140 Storage rack sys. (supp. roof)   X   03000 Super-flat concrete slab   X   13140 Roofing & wall panels   X   16400 Electrical system   X   15300 Sprinkler system   X   15764 Heating/ventilation system   X   13138 Mezzanine system   X La Petite 09250 Wall panels-porc.enamel/gyp.bd)   X   06170 Mansard roof   X   02825 Playground fence   X   16520 Exterior façade lighting sys.   X   15300 Fire protection sys.   X   15300 Heat & smoke detectors   X   16530 Emergency lights   X   10426 Illum. Exterior signs   X   10800 Child’s restrm./handicap cabinet   X   11442 Grease trap to counter   X   16200 Elec. Service to counter   X   02825 Dumpster encl: fence & concrete   X   15780 Thermal recov. Sys.–water heater   X   08300 Doors(kitchen, by-pass, Dutch)   X Mallinckrodt 09250 Partitions (gyp. drywall)   X McManus 13120 Ten unit hangar bldg.   X   08344 Hangar doors   X   08970 Glass/door storefront partitions X     10800 Toilet partitions   X   09510 False ceilings & grids   X   16510 Lay-in lighting facilities   X   16520 Exterior security lighting X     16510 Grow lights X     16510 Accent decor lighting (exterior) X     06400 Cabinets (plastics & hardware) X     02810 Sprinkler heads   X Minot Fed 10630 Pre-manuf. Wall partitions X     08100 Door units (in partitions) X   Morrison 16530 Emergency lighting X     16440 Kitchen panel boards X     15400 Kitchen hand sinks   X   15400 Kitchen water piping X     08380 Eliason doors X     10800 Restroom accessories   X   16500 Décor window treatment X     06440 Lattice millwork X     06400 Vanity cabinets & counters   X   09250 Customer line screen X     03000 Serving line concrete curb   X   15780 Kitchen heat recovery unit X     03000 Floors:cooler/freezer/garbage rm   X   13030 Garbage room   X   09300 Kit. sanitary wall & floor tile   X   15850 Kitchen air makeup unit X     15400 Kitchen drainage X     15412 Electric water coolers   X   16510 Chandeliers, décor wall lights X     15400 Kitchen hot water heater X     16400 Primary elec. Dist. sys. X X Munford 03000 Truck loading platform   X   03000 Rail loading platform   X   13030 Refrig. area (struct. elements)   X Piggly Wiggly 15700 HVAC units X   Publix 15700 HVAC system   X Schrum 13122 Car wash facility   X   15400 Plumbing system X     16200 Electrical system X   Scott Paper 16400 Primary elec. Dist. Sys. X X   16400 Secondary (general) elec.   X Shoney’s 16510 Chandeliers X     16510 Hanging lanterns X   back to the top TABLE BY CASE NAME   Case Name Master Format Division Asset Description 1245 1250 TI 03000 Waste treatment facilities X     09250 Drywall partitions   X   13122 Misc. structures & related equip   X   03000 Concrete floor & supp. columns X     03000 Concrete ground fl. & wood deck   X   08970 Window walls   X   09500 Ceilings   X   15700 Air conditioning for tele. room X     15400 Plumbing servicing equip. X     08100 Emergency doors   X   15300 Fire protection sys. – duct work X     15300 Fire protection system   X   02825 Security fencing X     02930 Interior landscaping X     02930 Exterior landscaping   X   16360 Cat. 1 – high voltage main   X   16400 Cat. 2 – breaker/feeder sys   X   16400 Cat. 3 – spare brkers, transf.   X   16400 Cat. 4 – carries load to equip X   Walgreen 09250 Partitions (drywall, glass)   X   10800 Restroom partition(metal)   X   06400 Millwork, metal work, trim   X   08100 Doors   X   09500 Ceilings (drywall, acoustical)   X   09680 Floor coverings (carpet, tile) X     16500 Elec. light fixtures, wire, etc.   X   10536 Décor: canopy, signs, concrete X   Westroads 16220 Elec. power generating equip. X   Whiteco 10426 Advertising signs (billboards) X   back to the top TABLE OF CASES BY CSI CSI Master Format Division Asset Description Property Type: Case Name     1245 1250 Division 02 – Sitework     Metro 02810 Sprinkler heads   X TI 02825 Security fencing X   La Petite 02825 Dumpster Encl. (fence & concrete)   X La Petite 02825 Playground fence   X Cons Freight 02825 Dock fence X   TI 02930 Interior landscaping X   TI 02930 Exterior landscaping   X           Division 03 – Concrete     TI 03000 Concrete floor & supp. columns X   TI 03000 Concrete ground fl. & wood deck   X AC Monk 03000 Concrete RR dock   X AC Monk 03000 Truck apron X   Morrison 03000 Floors: cooler/freezer/garbage rm   X Cons Freight 03000 Raised concrete loading dock   X Morrison 03000 Serving line concrete curb   X LL Bean 03000 Super-flat concrete slab   X Munford 03000 Truck loading platform   X TI 03000 Waste treatment facilities X   Munford 03000 Rail loading platform   X Duaine 03100 Concrete slab behind counter   X           Division 04 – Masonry                         Division 05 – Metals               AC Monk 05100 Raised roof   X McManus 05300 Metal partitions   X HCA 05720 Patient corridor handrails X             Division 06 – Wood & Plastics     Bod-Nol 06170 Exterior Mansard-Marlite roof panels   X La Petite 06170 Mansard Roof   X Metro 06400 Cabinets (plastics & hardware) X   Walgreen 06400 Millwork, metal work, trim   X Morrison 06400 Vanity cabinets & counters   X Morrison 06440 Lattice millwork X   Division 08 – Doors & Windows     TI 08100 Emergency Doors   x Walgreen 08100 Doors   X Centr Citrus 08100 Sweet room doors X   Minot Fed 08100 Door units (in partitions) X   La Petite 08300 Doors (kitchen, bypass and Dutch)   X Cons Freight 08330 Overhead doors   X McManus 08344 Hangar doors   X Morrison 08380 Eliason doors X   Bod-Nol 08582 Carousel drive-up window unit   X Bod-Nol 08830 Decorative mirror   X TI 08970 Window walls   X Metro 08970 Glass/door storefront partitions X X Division 09 – Finishes     La Petite 09250 Wall panels (porc. enameled/gyp.bd)   X Morrison 09250 Customer line screen X   TI 09250 Drywall partitions   X Mallinckrodt 09250 Partitions (gyp. drywall)   X Metro 09250 Partitions (gyp. drywall) X   Walgreen 09250 Partitions (drywall, glass)   X Grinalds 09250 Partitions (cubical type)   X Dixie Man 09250 Rm. Partitions (drywall/wood stud)   X Grinalds 09250 Walls (interior)   X Duaine 09300 Floor Tile   X Morrison 09300 Kitchen sanitary wall & floor tile   X Duaine 09300 Wall Tile   X TI 09500 Ceilings   X Walgreen 09500 Ceilings (drywall & acoustical)   X Bod-Nol 09500 Suspended Ceilings   X HCA 09510 Acoustical ceiling tile   X Metro 09510 False ceilings and grids   X Walgreen 09680 Floor coverings (carpet, tile) X   HCA 09680 Carpeting X   HCA 09720 Vinyl Wall Covering X     Division 10 – Specialties      Whiteco 10426 Advertising signs (billboards) X   La Petite 10426 Illum. Exterior Signs   X Walgreen 10536 Décor: canopy, signs, concrete X   King Radio 10630 Glazed partitions X   King Radio 10630 Movable Partition System X   King Radio 10630 Partitions (ceiling height) X   Minot Fed 10630 Pre-Manufactured Wall Partitions X   HCA 10650 Accordion doors/partitions X   AC Monk 10800 Lavatory Furnishings   X HCA 10800 Bathroom acces., plastic mirrors   X Walgreen 10800 Restroom partition (metal)   X Morrison 10800 Restroom accessories   X Metro 10800 Toilet partitions   X La Petite 10800 Child’s Restroom/Handicap Cabinet   X Grinalds 10800 Walls (restroom)   X Division 11 – Equipment     La Petite 11442 Grease trap to counter   X Division 12 – Furnishings                          Division 13 – Special Construction     Morrison 13030 Garbage room   X AC Monk 13030 Green storage room   X Circle K 13030 Cold storage room   X Munford 13030 Refrig. Area (structural elements)   X AC Monk 13120 Special rooms X   AC Monk 13120 Storage sheds X   McManus 13120 Ten unit hangar bldg.   X TI 13122 Misc. structures & related equip.   X Schrum 13122 Car wash facility   X LL Bean 13138 Mezzanine system   X LL Bean 13140 Storage rack system (supp. roof)   X LL Bean 13140 Roofing and wall panels   X Division 15 – Mechanical     Plumbing – Pipes and Fittings     Duaine 15100 Connecting fixtures to appliance X   Duaine 15100 Copper drain lines from refrigerator X   Duaine 15100 Gas lines from refrigerator X   Duaine 15100 Water lines to cooking table, etc. X   Fire Protection Systems     AC Monk 15300 Fire hose stations   X La Petite 15300 Heat and smoke detectors   X TI 15300 Fire protection system   X TI 15300 Fire protection system – duct work X   LL Bean 15300 Sprinkler system   X La Petite 15300 Fire protection system   X Plumbing – Fixtures     TI 15400 Plumbing servicing equip. X   Morrison 15400 Kitchen drainage X   Morrison 15400 Kitchen hand sinks   X Morrison 15400 Kitchen hot water heater X   Morrison 15400 Kitchen water piping X   HCA 15400 Kitchen water pipe, grease trap X   Bod-Nol 15400 Plumbing to equip.   X HCA 15400 Plumbing to x-ray X   Grinalds 15400 Plumbing – restroom   X Schrum 15400 Plumbing system X   Morrison 15412 Electric water coolers   X           HVAC      HCA 15510 Steam boilers & acces.   X AC Monk 15700 Louvered wall to boiler X   TI 15700 Air conditioning for telephone room X   Dixie Man 15700 Air conditioning/heating (roof)   X Centr Citrus 15700 Blowers X   Centr Citrus 15700 Coolers X   Grinalds 15700 Air conditioning units   X Piggly Wiggly 15700 HVAC units X   Albertson’s 15700 HVAC system   X Publix 15700 HVAC system ` X Circle K 15700 Air conditioning units (roof)   X Bod-Nol 15700 Kitchen HVAC   X LL Bean 15764 Heating/ventilation system   X Morrison 15780 Kitchen heat recovery unit X   La Petite 15780 Thermal recovery system – water heater   X Morrison 15850 Kitchen air makeup unit X   HCA 15850 Kitchen hood & exhaust system X   Division 16 – Electrical     Wire, Conduit, J-boxes to End Use Fixture     Centr Citrus 16140 30-amp. Switch X   Duaine 16140 Electrical outlets to equip. X   Centr Citrus 16140 Elec. Outlets X X Grinalds 16200 Elec. Conduit & recep. – restroom   X HCA 16200 Elec. Wiring – inter-com equip X   HCA 16200 Branch elec. – TV equip X   La Petite 16200 Electrical service to counter   X Schrum 16200 Electrical system X   Generating Equipment     Westroads 16220 Electrical power generating equip. X   Power Transmission     Centr Citrus 16300 Elec. Transformer to facilities   X Centr Citrus 16300 Elec. Transformer for dumpster X   Centr Citrus 16300 Elec. Transformer for Sweet rooms X   TI 16360 Category 1 – high voltage (main)   X Service and Distribution     HCA 16400 Primary & secondary elec. Distrib. X X HCA 16400 Branch elec. dist. System X X TI 16400 Category 2 – breaker/feeder system   X TI 16400 Category 3 – spare breakers & transformers   X TI 16400 Category 4 – carries load to equip. X   Scott Paper 16400 Primary electrical distribution system X X Scott Paper 16400 Secondary (general) electrical services   X Bod-Nol 16400 Electrical to equip.   X Ill Cereal 16400 Electrical distribution system (95%) X   AC Monk 16400 Elec. dist. to lights & machines   X LL Bean 16400 Electrical system   X Centr Citrus 16400 Elec. – dead front panel   X Centr Citrus 16400 Elec. dist: adaptors, relays, fuses, switches X   Centr Citrus 16400 Elec. gutter plus ends & cuttings X   Morrison 16400 Primary electrical dist. System X X Morrison 16400 Kitchen panel boards X   Lighting     Morrison 16500 Décor window treatment X   Walgreen 16500 Elec. light fixtures, wire, etc.   X Metro 16510 Accent decorative lighting (exterior) X   Centr Citrus 16510 Ballast lights X   Shoney’s 16510 Chandeliers X   Morrison 16510 Chandeliers, décor wall lights X   Centr Citrus 16510 Fluorescent fixtures X X Metro 16510 Grow lights X   Shoney’s 16510 Hanging lanterns X   Metro 16510 Lay-in lighting   X Cons Freight 16510 Light fixtures – mercury vapor   X Centr Citrus 16510 Moisture-proof lamps X   Duaine 16510 Ornamental light fixtures   X HCA 16510 Over-bed recessed lights   X Centr Citrus 16510 Spotlight & flood lamp X X La Petite 16520 Exterior façade lighting system   X Metro 16520 Exterior security lighting X   Morrison 16530 Emergency lighting X   La Petite 16530 Emergency lighting   X Communications     HCA 16700 Telephone wiring, conduit jacks, etc. X   back to the top   Chapter 6.3 | Table of Contents | Chapter 6.5