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Rev. Rul. 67-156


Rev. Rul. 67-156; 1967-1 C.B. 7

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Citations: Rev. Rul. 67-156; 1967-1 C.B. 7

Modified and Superseded by Rev. Rul. 77-291

Rev. Rul. 67-156

The question has been asked whether, under the facts stated, a motor vehicle trailer located in a trailer park and used as a launderette will qualify as "section 38 property" for the investment credit allowed under section 38 of the Internal Revenue Code of 1954 and as "section 179 property" for the additional first-year depreciation allowance under section 179 of the Code.

Many trailer parks contain housetrailers of a permanent nature and also accommodate overnight parking of housetrailers for persons who are transient. Some of these trailer parks provide laundry facilities for their tenants in a building whereas others, as in this case, convert mobile type trailers to provide these facilities.

Generally, most trailers use the same kind of shell or skin, running gear, wheels, tires, frames, windows, roof, doorways, doors, etc. Therefore, the outward appearance of one trailer resembles that of another. On the other hand, the interior fittings of trailers differ substantially, depending upon the purpose for which it is to be used. For example, an office trailer is usually equipped with office furniture, such as flattop desks, slanttop draftsman's tables, and similar items.

The launderette in the instant case is equipped with washing machines and dryers, appropriate water and electrical connections, and other equipment ordinarily found in a laundry. In this case, the trailer is used as a laundry building and as a permanent structure at its location in the trailer park.

A taxpayer is allowed under section 38 of the Code to claim a credit against his tax for his qualified investment in "section 38 property." This includes depreciable "tangible personal property" or certain depreciable "other tangible property" (other than buildings and their structural components), having a useful life of four years or more.

An asset which has mobility characteristics is not automatically excluded from the category of buildings for investment credit purposes. Its actual functional use rather than its possible use will be controlling. See section 1.48-1(e)(1) of the Income Tax Regulations which defines a building as any structure or edifice enclosing a space within its walls, and usually covered by a roof, the purpose of which is to provide shelter or housing or to provide working, office, parking, display, or sales space.

An asset which, in fact, is primarily used to provide living, working, office, parking, display, sales space, or any other similar use, as distinguished from its use in transporting persons, freight, or equipment, is generally included within the term "building" as used in section 1.48-1(e)(1) of the regulations. The fact that an asset, incidental to its primary use, may be moved from one location to another location does not detract from its primary use as a building.

Under section 179 of the Code, a taxpayer may elect, in the first taxable year for which a deduction for depreciation is allowed on "tangible personal property," an additional depreciation allowance of 20 percent of the cost of the property subject to certain limitations. Only depreciable "tangible personal property" which has a useful life of 6 years or more qualifies.

Section 1.179-3(b) of the regulations provides that local law definitions will not be controlling for purposes of determining the meaning of the term "tangible personal property." Land and land improvements such as buildings or other inherently permanent structures (including items which are structural components of such buildings or structures), are excluded from the term "tangible personal property."

For purposes of determining whether property qualifies as "section 179 property" the distinction between a land improvement and tangible personal property for a structure which is designed with mobility characteristics will depend on the relative permanence of the structure.

Accordingly, under the facts stated, the motor vehicle trailer used as a launderette is a building within the meaning of sections 1.48-1(e)(1) and 1.179-3(b) of the regulations and does not qualify either as "section 38 property" for the investment credit or as "section 179 property" for the additional first-year depreciation allowance.

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