Restaurant Kitchen Equipment

A restaurant kitchen is a process inside a building. Treas. Reg. §1.48-1(c) treats production machinery and refrigerators as tangible personal property even when attached. Structural components under section 1.48-1(e)(2) still include plumbing fixtures such as sinks, electric wiring relating to building operation, components of a central air-conditioning or heating system, floors, permanent coverings, and sprinkler systems. The building itself is a roofed enclosure used for, among other things, sales space. Local fixture law does not control. Hospital Corp. of America held that these tests apply under MACRS.

Publication 5653 reprints the restaurant field directive as examiner guidance. Food storage and preparation equipment is treated as section 1245, class 57.0, five-year property in that table. Kitchen equipment hook-ups — dedicated water, gas, and drain lines, equipment exhaust hoods, air makeup solely for kitchen equipment, and dedicated outlets — travel with the equipment. Restroom accessories and partitions, fireplaces, and central HVAC are building. Separate kitchen HVAC units that meet the sole-justification test are treated as class 57.0, and the matrix states that allocation of HVAC is not appropriate. Carpeting is treated as not permanent for the restaurant industry. Those rows describe a general restaurant fact pattern.

Morrison, Inc. v. Commissioner, 891 F.2d 857 (11th Cir. 1990), affirmed a cafeteria decision that applied Scott Paper functional allocation to primary electrical cost and allowed kitchen panel boards, while denying kitchen hand sinks, garbage rooms, floors, sanitary walls, floor tiles, and serving-line curbs. The same kitchen therefore produced different results for equipment connections and for occupancy finishes. Boddie-Noell Enterprises, Inc. v. United States, 36 Fed. Cl. 722 (1996), held that items listed as structural components were not creditable and that after-the-fact percentage estimates of HVAC, electrical, plumbing, and ceiling shares were too unreliable. Courts split on restaurant assets by item and by record quality.

Rev. Proc. 2002-12 allows restaurants and taverns to treat smallwares as materials and supplies under Treas. Reg. §1.162-3, deducted when received at the restaurant and available for use. Smallwares bought before a new restaurant opens are start-up costs outside the safe harbor. Using that procedure does not convert the dining room into 15-year property and is not Rev. Proc. 97-10, which concerns retail motor fuels outlets. Whiteco’s six permanence factors remain a court test for inherently permanent structures. They help with theme décor; they do not pull a listed restroom sink into the cook line.

Scott Paper load allocation is an electrical-distribution method. Publication 5653 Chapter 8.A tells examiners not to challenge a properly applied allocation of primary and secondary electrical distribution. It does not present that method as an IRS-accepted allocation of plumbing or HVAC. Dedicated kitchen outlets are shown by homeruns. A mixed rooftop unit is not split by cook-line square footage under the restaurant matrix.