Recovery Periods for Depreciation of Cell Phone Equipment Determined (Broz, TC)

Recovery periods used by a telecommunications company for some of its equipment were redetermined by the Tax Court. The taxpayers operated a company that provided wireless cellular service. The company depreciated its equipment in generic categories, rather than as individual items, depreciating antenna support equipment over seven years, cell site equipment over five to seven years, and leased digital equipment over five years.

The IRS determined the applicable recovery period for the first category to be 15 years and for most of the equipment in the remaining categories to be 10 years. The IRS determined that one item, the switch (which contained computer and radio components and which routed calls to the appropriate place), had been properly classified by the taxpayers with a recovery period of five years.

Looking at the express language of Code Sec. 168 and the Federal Communications Commission’s uniform classification system, the Tax Court reclassified the assets at issue. The taxpayers’ first category, antenna support structures, was given a recovery period of 15 years, rather than the seven years used by the taxpayers. Except for the switch, which was properly classified by the taxpayers at five years, items belonging to the taxpayers’ second category, cell site equipment, as well as items in the third category, leased digital equipment, were properly classed as telephone central office equipment, with a recovery period of 10 years. Finally, depreciation could not be claimed on equipment previously acquired until the year it was actually put into service.

R. Broz, 137 TC –, No. 3, Dec. 58,693

Other References:

Code Sec. 168

CCH Reference – 2011FED ¶11,258.815

CCH Reference – 2011FED ¶11,279.58

CCH Reference – 2011FED ¶11,279.68

Tax Research Consultant

CCH Reference – TRC DEPR: 3,154.05

CCH Reference –

TRC DEPR: 3,156


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