42.15 Depreciating Real Estate Placed in Service After 1980 and Before 1987

The ACRS recovery period of almost all buildings placed in service before 1987 has already ended. Some pre-1987 buildings are still being depreciated over a 35-year or 45-year period if the straight-line election discussed in the next paragraph was made.

Planning Reminder

Abandonment of Leasehold Improvements

Upon the termination of a lease, the adjusted basis of a lessee’s leasehold improvements that are abandoned may be claimed as a loss. A lessor may follow the rule applied to lessees if the improvements are irrevocably disposed of or abandoned at the termination of the lease. The lessor may recognize loss for the remaining adjusted basis of the improvements.

- - - - - - - - - -

Election to use straight-line depreciation.

For 15-year, 18-year, or 19-year real property, you may have elected to use the straight-line method over 35 or 45 years. An election of the straight-line method for real property had to be made on a property-by-property basis, by the return due date, plus extensions, for the year the property was placed in service.

Rate of recovery.

The rate of recovery is listed in Treasury tables that are available in IRS Publication 534.

Substantial improvements.

Substantial improvements made after 1986 to an ACRS building are depreciable under MACRS (42.13), not ACRS.

Recapture.

See 44.1 for recapture rules on the sale of ACRS property.