Code section · 1962
IRC Section 48
IRC Section 48
Internal Revenue Code
Audio summary
A short audio walkthrough of this rule: what it says and why it matters for your study.
What it holds
Authorized the Investment Tax Credit starting in 1962 and defined tangible personal property eligible for the credit. Section 48 contained the specific definitions and rules that courts applied when determining whether property was personal property or a structural component of a building.
Why it matters for your study: Section 48 is the statutory parent of the tangible-personal-property tests that every cost segregation study uses today. The definition of tangible personal property and the structural-component exclusion in Section 48 are the conceptual root of modern Section 1245 classification.
Where this comes from
The Investment Tax Credit was created in 1962 to encourage business investment. Section 38 of the Code defined eligible property generally, and Section 48 provided the specific rules and definitions. Together they created the ITC regime.
Section 48(a)(1) defined tangible personal property as any tangible property other than a building or its structural components. This was the key dividing line.
What it established
The Treasury regulations under Section 48, particularly Treas. Reg. 1.48-1(e), defined structural components as parts of a building that serve the building's general utility. Items like walls, floors, ceilings, windows, doors, central air conditioning, plumbing fixtures, and wiring that serves the building as a whole were structural components.
Property that served a specific manufacturing or processing function, rather than the building's general utility, could qualify as personal property even if physically attached to the building. This functional analysis gave rise to the sole-justification test and other classification principles that run through modern cost segregation.
How it connects to a study today
When you read cases like Hospital Corp. of America, Central Citrus, Piggly Wiggly, or the other decisions in the ATG, they are all applying Section 48 definitions to determine whether a building component is personal property or a structural component.
When HCA applied those same definitions to MACRS classification, and when the IRS acquiesced in A.O.D. 1999-008, it created a direct line from Section 48's definitions to the work in a modern study. The test you apply to decide whether a component is 5-year or 39-year property traces back to this statute.
What it does not mean
The general ITC under Section 48 was repealed in 1986. A current Section 48 deals with energy property, which is a different credit and a different section.
For cost segregation purposes, Section 48 is a historical authority. The analytical tests it generated are still in use. But the operative law today is Section 1245, the MACRS provisions in Section 168, and the bridge authority in A.O.D. 1999-008 and the ATG.
Primary source
Read the official text for yourself, or share it with your advisor.
- Category
- Asset classification
- Applies to
- All property types
- Status
- Vetted
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.