Court case · 2015
Stine, LLC v. United States
2015 WL 403146 (W.D. La. Jan. 27, 2015), nonacq., A.O.D. 2017-02
U.S. District Court (W.D. La.)
Taxpayer won
Audio summary
A short audio walkthrough of this case: what happened, what the court decided, and why it matters for your study.
The facts
A building-supply retailer finished two Louisiana stores in 2008. Fire marshals issued certificates of occupancy, and employees were stocking merchandise inside. But the stores had not opened to customers by December 31, 2008, the deadline for a special Gulf Opportunity Zone 50 percent bonus. The company claimed the bonus. The IRS said the stores were not yet placed in service because they had not opened for business.
What the court decided
The court ruled for the taxpayer. Placed in service means the property is in a state of readiness for its intended function. A certificate of occupancy and employees stocking shelves showed the buildings were ready. Being open to customers is not required. The IRS formally disagreed with the ruling (A.O.D. 2017-02, nonacquiescence), meaning it will fight this in other courts.
Why it matters for your study: This case defines placed in service in a way that favors property owners completing construction late in the year. Bonus depreciation requires placing property in service before a deadline. Substantial completion and readiness, not an open-for-business date, can satisfy that standard. Document your certificate of occupancy and readiness date carefully.
Parts the case looked at
- Retail store buildings (placed-in-service timing for bonus)
IRS acquiescence: IRS issued A.O.D. 2017-02 (nonacquiescence, Apr. 13, 2017). The IRS disagrees and will litigate this issue in courts outside the Western District of Louisiana.
Where this comes from
Bonus depreciation lets you write off a large portion of a building's shorter-life components in year one. But you must place the property in service before a specific deadline. That date-of-service question becomes critical when construction finishes close to the end of the year.
Stine LLC finished two Louisiana stores in 2008 under a Gulf Opportunity Zone bonus with a December 31, 2008 deadline. Certificates of occupancy were issued. Employees were inside stocking merchandise. But the doors had not opened to customers yet. The IRS said that meant the stores were not placed in service.
What it decided
The district court disagreed with the IRS. Placed in service means the property is in a state of readiness for its assigned function. A building with a fire marshal's certificate of occupancy and employees working inside is ready to perform its function as a retail store. Opening to customers is an operational event, not a tax-law requirement.
The company was entitled to the 50 percent Gulf Opportunity Zone bonus for 2008.
One large caveat: the IRS issued Action on Decision 2017-02 in April 2017, a formal nonacquiescence. That means the IRS disagrees with the decision and intends to litigate the same question in other courts outside the Western District of Louisiana.
How it shows up in a study
Year-end construction is common. If a building is substantially complete before December 31 but has not yet opened for business, Stine supports treating it as placed in service for bonus depreciation purposes.
Your study should document the physical state of the property at year-end: the certificate of occupancy, the date employees began occupying the building, and any written confirmation that the building was ready for its intended use. That documentation is your protection if timing is questioned.
What it does not mean
Stine is a single district court decision with an IRS nonacquiescence on it. The IRS will challenge the same argument elsewhere. This is not a settled national rule, and courts in other circuits are not bound by it.
The case also does not say that any property in any state of completion qualifies. The facts here were strong: occupancy certificate issued, employees inside and working. A building with no occupancy certificate and no one inside is a different situation. Document readiness carefully.
Primary source
Read the official text for yourself, or share it with your advisor.
- Category
- Bonus depreciation & expensing
- Outcome
- Taxpayer won
- 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.