Rev. Rul. 65-79

Where this comes from

In 1965, the investment tax credit (ITC) gave businesses a direct credit against their tax bill for buying tangible personal property. The credit did not apply to buildings or structural components of buildings. So whether something was personal property or part of the building had a direct and immediate tax consequence.

Revenue Ruling 65-79 came from the IRS in 1965 and answered this question for a specific set of bank assets. The ruling applied the structural-component definition in Regulation 1.48-1(e), which was the ITC regulation defining what counts as a building versus personal property.

What it established

The ruling analyzed several specific bank assets and decided which side of the line each one fell on. Vault doors, record vault doors, night depositories, and walk-up and drive-up teller windows all qualified as Section 38 personal property eligible for the ITC. They were equipment, not the building itself.

A drive-up teller booth was ruled to be a building. Its enclosure and structure made it more like a building component than a piece of equipment.

The ruling also made an important statement about the role of state law. Property can qualify as personal property for federal tax purposes even if the local state law treats it as a fixture attached to real estate. Federal tax classification is determined by the federal standard, not by local property law.

How it shows up in a study

This ruling is part of the foundational precedent that every cost segregation study draws on. The ITC regulation that this ruling applied used the same structural-component definition that carries through into MACRS depreciation analysis. The IRS confirmed in its Action on Decision AOD 1999-008 that the personal property principles from the ITC era apply to the MACRS context.

The practical lesson from this ruling is that specific-purpose items installed in a building, such as teller windows, vault doors, or other equipment tied to the building's use, can qualify as personal property even though they are physically attached to the structure. The question is whether they function as part of the building itself or as part of the business operation inside the building.

What it does not mean

This ruling was decided under the ITC regulations, not under MACRS. The specific tax credit it addressed no longer exists in its original form. The ruling has historical force as precedent, not as a binding rule that directly determines today's MACRS classification.

It also does not mean that all bank assets are personal property, or that all industry-specific equipment inside a building automatically qualifies. The ruling applied to specific assets with specific characteristics. Each classification in a current study needs to be supported by the current rules, with the older rulings as supporting precedent.