When depreciating real property by the straight-line method should you use 31.5 yrs. or 39 yrs.?

Question

In the IRS Publication 946 (2007) for depreciation of non-residential real property by the straight-line method (Chart 2 located on Page 70), it gives two different time periods- one for 31.5 yrs. and the other for 39 yrs. Do I have the option of using either one, or is there a distinction between the two that I am not aware of?

Answer 1

IRS Publication 946 covers all allowed and allowable depreciation methods - long story - regarding the income tax consequences.   There is MACRS and there is the ADS - alternative depreciation system.   Now please scroll from Chart 2 down to page 74.  There is Table  A-7a:  straight line 39 yea rs.

You may depreciate non-residential real estate over a period of 39 years.   If you meet ALL of the the requirements, stipulations and restrictions, the IRS will allow you to depreciate over 31.5, subject to depreciation recapture.  That's IRS logo for you may have to report income if you sell the investment, or a few other tax circumstances along that line.  I practiced as an enrolled agent and frequently heard from clients and taxpayers that they can save a lot on their taxes by double declining method depreciation, Section 179 and another method that expired on December 31, 2006 and is still allowed in a very few states in a very limited way.   I always had to caution my clients not to listen to all the hype that comes from sources trying to get you to spend you money on them for poor advice that does not take in to account future consequences.   Unless you are very sure of your income tax situation 20, 25 years down the road, I would not accelerate it.  Good luck

Answer 2

It depends when you placed it into service.  If it was placed into service before May 13, 1993 you can use the 31.5 year recovery period.  Anything placed into service afterward uses the 39 year period.