15-year recovery period for certain qualified leasehold improvements.Prior to the AJCA AJCA American Jobs Creation Act of 2004 (US) AJCA American Jersey Cattle Association AJCA Association of Juvenile Compact Administrators AJCA All Japan Cooks Association AJCA Alabama Junior Cattlemen’s Association , if a leasehold improvement Leasehold Improvement Improvements on a leased asset that increase the value of the asset. Notes: A leasehold improvement is classified as an asset that must be depreciated over time. constituted an addition or improvement to nonresidential real property already placed in service, the improvement was depreciated Depreciated may refer to:
straight-line method of depreciation over 39 years, under Sec. 168. New Law ACJA ACJA American Criminal Justice Association ACJA American Cookie Jar Association ACJA Alberta Criminal Justice Association ACJA Achyranthes japonica (Japanese chaff flower) ACJA Arkansas Criminal Justice Association Section 211 requires that "qualified leasehold improvements" be depreciated using the straight-line method and a 15-year recovery period. A "qualified leasehold improvement" is defined as any improvement to an interior portion of a building that is nonresidential real property, provided: 1. The improvement is made under a lease either by the lessee (or sublessee), or by the lessor, of that portion of the building to be occupied exclusively by the lessee (or sublessee); 2. The improvement is placed in service more than three years after the date the building was first placed in service; and 3. The improvement is not attributable to the enlargement of the building, any elevator or escalator escalator Moving staircase used as transportation between floors or levels in stores, airports, subways, and other mass pedestrian areas. The name was first applied to a moving stairway shown at the Paris Exposition of 1900. , any structural component benefiting a common area or the internal structural framework of the building. In addition, if a lessor makes a qualified leasehold improvement, such improvement does not qualify as qualified leasehold improvement property to any subsequent owner of the improvement, unless acquired by reason of death or certain nonrecognition property transfers (e.g., Secs. 351,721, etc.). Effective Date The provision is effective for property placed in service after Oct. 22, 2004 and before 2006. Implications This is a very favorable provision and should be an incentive for lessees and/or lessors to perform improvements. The provision effectively reduces the recovery period for qualified leasehold improvements by more than half. The Service and Treasury issued regulations defining qualified leasehold improvements under the bonus depreciation rules that should be used in determining qualification for this depreciation provision. Taxpayers should also be aware that this is a straight-line method, unlike other modified accelerated cost recovery system Modified Accelerated Cost Recovery System (MACRS) A 1986 act that set out rules for the depreciation of qualifying assets, allowing for greater acceleration over longer periods of time. 15-year recovery property, which is generally eligible for the 150% declining-balance method. FROM JANE ROHRS, WASHINGTON, DC |
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