Cost Recovery Issues Involving the Acquisition of Open-Air and Prefabricated Structures

Mark A. Segal, JD, LLM, CPA, and Bruce M. Bird, JD, MST, CPA

Over time, some taxpayers might encounter cost recovery issues involving the acquisition of certain types of structures. In most situations, the acquisition of open-air or prefabricated structures occurs pursuant to the acquisition of nonresidential real property. When acquiring a depreciable structure, a taxpayer's goal is typically to “shorten” the time period during which cost recovery will occur for some or all of the total acquisition cost involved. The difference in depreciation expense in each of the early years of such a structure's useful life can, in many situations, provide a taxpayer with a significant deferral of tax liability.