component depreciation


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component depreciation

A former practice of separating a building into its various components—walls,roof,etc.—and then depreciating each component separately,some more rapidly than others, in order to generate large tax deductions. (This is no longer allowed by the IRS, except in a modified form called cost allocation.)

References in periodicals archive ?
When properly applied, ARM suggests that component depreciation may be preferable because it likely "will result in a more accurate determination of depreciation and will facilitate accounting when the component is replaced.
38 definition of personal property, which allowed the taxpayer to use a cost technique that resulted in the classification of many parts of its hospitals as personal property The IRS eventually agreed that cost segregation does not constitute component depreciation.
In this case, it is possible to use the component depreciation (since 2009 also in the Czech Republic), which more accurately shows the fact.
The tax position concerning the component depreciation deduction qualifies for recognition because the MLTN test is met.
In decision 1999-008, the IRS reluctantly agreed that cost segregation does not constitute component depreciation.
They prohibited the use of component depreciation and created a new method referred to as Modified Accelerated Cost Recovery System or MACRS.
4) He notes that the crucial difference between the use of the breakdown method of computing physical depreciation and using the simpler age-life method is that the breakdown method employs estimates of physical life to compute building component depreciation whereas the age-life method utilizes a ratio of effective age to economic life.
The ITC and component depreciation were eliminated and replaced by MACRS under the Tax Reform Act of 1986.
A key and controversial component of that, he said, is component depreciation, the concept that different components of PPE depreciate at different rates.
HCA convinced the court that breaking out specific portions of the cost of a building and assigning them shorter depreciable lives did not violate the Economic Recovery Tax Act of 1981's ban on component depreciation, but was an appropriate segregation of costs under the old investment tax credit rules.
Some believe that component depreciation threatens comparability because of the discretion it would allow to each company's management.
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