| Pub. 946, How To Depreciate Property |
2005 Tax Year |
Publication 946 - Additional Material
Appendix B — Table of Class Lives and Recovery Periods
The Table of Class Lives and Recovery Periods has two sections. The first section, Specific Depreciable Assets Used In All Business
Activities, Except As Noted, generally lists assets used in all business activities. It is shown as Table B-1. The second section,
Depreciable Assets Used In The Following Activities, describes assets used only in certain activities. It is shown as Table B-2.
You will need to look at both Table B-1 and B-2 to find the correct recovery period. Generally, if the property is listed
in Table B-1 you use the
recovery period shown in that table. However, if the property is specifically listed in Table B-2 under the type of activity
in which it is used, you
use the recovery period listed under the activity in that table. Use the tables in the order shown below to determine the
recovery period of your
depreciable property.
Table B-1.
Check Table B-1 for a description of the property. If it is described in Table B-1, also check Table B-2 to find the
activity in which the property
is being used. If the activity is described in Table B-2, read the text (if any) under the title to determine if the property
is specifically included
in that asset class. If it is, use the recovery period shown in the appropriate column of Table B-2 following the description
of the activity. If the
activity is not described in Table B-2 or if the activity is described but the property either is not specifically included
in or is specifically
excluded from that asset class, then use the recovery period shown in the appropriate column following the description of
the property in Table B-1.
Tax-exempt use property subject to a lease.
The recovery period for ADS cannot be less than 125 percent of the lease term for any property leased under a leasing
arrangement to a tax-exempt
organization, governmental unit, or foreign person or entity (other than a partnership).
Table B-2.
If the property is not listed in Table B-1, check Table B-2 to find the activity in which the property is being used
and use the recovery period
shown in the appropriate column following the description.
Property not in either table.
If the activity or the property is not included in either table, check the end of Table B-2 to find Certain Property for Which Recovery
Periods Assigned. This property generally has a recovery period of 7 years for GDS or 12 years for ADS. See Which Property Class Applies
Under GDS and Which Recovery Period Applies in chapter 4 for the class lives or the recovery periods for GDS and ADS for the
following.
-
Residential rental property and nonresidential real property (also see Appendix A, Chart 2).
-
Qualified rent-to-own property.
-
A motorsport entertainment complex.
-
Any retail motor fuels outlet.
-
Any qualified leasehold improvement property placed in service before January 1, 2006.
-
Any qualified restaurant property placed in service before January 1, 2006.
-
Initial clearing and grading land improvements for gas utility property and electric utility transmission and distribution
plants.
-
Any water utility property.
-
Certain electric transmission property used in the transmission at 69 or more kilovolts of electricity for sale and placed
in service after
April 11, 2005.
-
Natural gas gathering and distribution lines placed in service after April 11, 2005.
Example 1.
Richard Green is a paper manufacturer. During the year, he made substantial improvements to the land on which his paper plant
is located. He checks
Table B-1 and finds land improvements under asset class 00.3. He then checks Table B-2 and finds his activity, paper manufacturing,
under asset class
26.1, Manufacture of Pulp and Paper. He uses the recovery period under this asset class because it specifically includes land improvements.
The land improvements have a 13-year class life and a 7-year recovery period for GDS. If he elects to use ADS, the recovery
period is 13 years. If
Richard only looked at Table B-1, he would select asset class 00.3, Land Improvements, and incorrectly use a recovery period of 15 years
for GDS or 20 years for ADS.
Example 2.
Sam Plower produces rubber products. During the year, he made substantial improvements to the land on which his rubber plant
is located. He checks
Table B-1 and finds land improvements under asset class 00.3. He then checks Table B-2 and finds his activity, producing rubber
products, under asset
class 30.1, Manufacture of Rubber Products. Reading the headings and descriptions under asset class 30.1, Sam finds that it does not
include land improvements. Therefore, Sam uses the recovery period under asset class 00.3. The land improvements have a 20-year
class life and a
15-year recovery period for GDS. If he elects to use ADS, the recovery period is 20 years.
Example 3.
Pam Martin owns a retail clothing store. During the year, she purchased a desk and a cash register for use in her business.
She checks Table B-1
and finds office furniture under asset class 00.11. Cash registers are not listed in any of the asset classes in Table B-1.
She then checks Table B-2
and finds her activity, retail store, under asset class 57.0, Distributive Trades and Services, which includes assets used in
wholesale and retail trade. This asset class does not specifically list office furniture or a cash register. She looks back at Table B-1 and
uses asset class 00.11 for the desk. The desk has a 10-year class life and a 7-year recovery period for GDS. If she elects
to use ADS, the recovery
period is 10 years. For the cash register, she uses asset class 57.0 because cash registers are not listed in Table B-1 but
it is an asset
used in her retail business. The cash register has a 9-year class life and a 5-year recovery period for GDS. If she elects
to use the ADS method, the
recovery period is 9 years.
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