IRS guidance · 2025
ATG Ch. 6.E — The Inherently Permanent Standard
IRS Pub. 5653 (2-2025), Ch. 6.E — Inherently Permanent Standard
IRS administrative guidance
Audio summary
A short audio walkthrough of this rule: what it says and why it matters for your study.
What it holds
Chapter 6.E of the IRS Cost Segregation Audit Techniques Guide explains the inherently permanent test. That test draws the line between Section 1245 personal property (faster write-off) and Section 1250 structural components (slower write-off). If a building part is inherently permanent, it is structural. If it is not, it can be treated as personal property. The chapter traces this standard across Sections 168, 263A, and 199, and anchors it in Hospital Corp. of America.
Why it matters for your study: Every reclassification in a study rests on this test. When we move a component from the 39-year class to a 5 or 7-year class, we are saying it is not inherently permanent. Chapter 6.E is the IRS's own reference for that judgment.
Where this comes from
The Tax Court's 1997 Hospital Corporation of America decision validated separating a building into personal property and structural components for depreciation purposes. After that ruling, the IRS needed a clear standard for its own examiners.
Chapter 6.E of Publication 5653 is the IRS's answer. It synthesizes the test across multiple code sections and connects the concept back to HCA. The chapter is how the inherently permanent standard became an official part of the IRS's own audit guide.
What it says
The test asks one question: is this building part permanently fixed to the structure, or does it serve a specific function and could be removed without damaging the building?
If the part is permanent, it is a structural component under Section 1250. Think of load-bearing walls, roof systems, and general building finishes. A general suspended ceiling throughout an office building is inherently permanent. So is a standard HVAC system that conditions the whole building.
If the part is not inherently permanent, it can qualify as Section 1245 personal property. A raised computer floor on adjustable pedestals is not permanent. Removable wall partitions that screw to a ceiling grid are not permanent. Specialty wiring that serves a specific piece of equipment is not permanent. Each of these can move to a faster depreciation class.
How it shows up in a study
Every line in a cost segregation report that moves a component to a shorter life is backed by a judgment that the item fails the inherently permanent test. Chapter 6.E is the ATG reference that anchors each of those judgments.
On exam, an IRS agent will use this same chapter to evaluate whether reclassifications hold up. A study that documents why each component is not inherently permanent, using the same language and factors the ATG describes, gives the examiner a clear trail to follow.
What it does not mean
The inherently permanent test is not the only question. Even if something is not permanently attached, it still needs to meet the other requirements for personal property. And the test does not guarantee a particular outcome. Removability is one factor, not a free pass.
Chapter 6.E is also not binding law. It is guidance for examiners. Courts can and do reach different conclusions. A study should document the factual basis for each classification, not just cite the chapter.
Primary source
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This page explains a tax authority in plain words. It is not tax advice for your situation. The way this authority applies to your property is reviewed by a licensed tax professional. Citation is provided so you or your advisor can read the primary source.