Furthermore, the IRS stated that, in order for the buildings at issue to be considered ready and available for their specifically assigned function (i.e., placed in service), they must be ready and available for regular operation and income-producing use. Rather, the IRS stated that the taxpayer intended to use the buildings as retail stores, so the taxpayer must show the buildings were ready and available for that use. Under AOD 2017-02, the IRS formally rejected the district court's ruling in Stine, stating that the court erred in holding that the taxpayer's intended use of the buildings was to house and secure racks, shelving and merchandise. The district court ruled in favor of the taxpayer, stating that the IRS failed to cite any authority to support its argument of an "open for business" standard for determining when a building is placed in service. The IRS argued that the two buildings were not "open for business" before January 1, 2009, because they were not placed in service in 2008. This was evidenced by the certificates of completion and limited occupancy that were issued before December 31, 2008. Although the retail locations were not yet open to the general public, the taxpayer argued that the buildings were considered placed in service when they were substantially complete and ready and available for their intended use to store and house equipment, racks, shelving and merchandise. Both buildings were located in the Gulf Opportunity Zone and would qualify for 50% bonus depreciation if deemed to be placed in service before January 1, 2009. In 2008, the taxpayer, a building materials and supplies retailer, constructed two new buildings to be used in its retail operations. Thus, for example, in the case of a factory building, such readiness and availability is be determined without regard to whether the machinery or equipment that the building houses, or is intended to house, has been placed in service. Section 1.167(a)-11 provides that the building will ordinarily be placed in service on the date the construction, reconstruction, or erection is substantially complete and the building is in a condition or state of readiness and availability. For a building that is intended to house machinery and equipment and is constructed, reconstructed or erected by or for the taxpayer and for the taxpayer's use, Treas. 1įor purposes of both depreciation under Section 167 and the investment tax credit under Section 46, property is considered placed in service when it is in a condition or state of readiness and availability for a specifically assigned function. United States, which concluded that, for a building housing a retail store, the store does not need to be open for business to the general public for the building to be considered placed in service. On April 10, 2017, the Internal Revenue Service (IRS) announced in Action on Decision (AOD) 2017-02 that it disagrees with the decision reached by the US District Court for the Western District of Louisiana in Stine, LLC v. Action on Decision 2017-02 indicates IRS scrutiny of building placed-in-service dates
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