Illustrative Medical Facility
A hypothetical imaging clinic used to separate machines and dedicated power from the 39-year medical office building. Educational information, not tax advice.
Educational information, not tax advice.
Updated 2026-10-14
Assumptions
- Educational information, not tax advice.
- Assume a single-story outpatient imaging clinic, not a hospital and not a copy of HCA’s classified list.
- Assume the MRI and CT are personal property. The open question is dedicated utilities and the Faraday cage, documented with load evidence.
- The IRS acquiesced only in HCA’s legal test, not in every hospital item result.
- Any dollar figures below are invented for arithmetic only. They are not a typical mix and not a client result.
Key takeaways
- The clinic building is generally 39-year nonresidential real property.
- Use HCA’s legal test, not HCA’s hospital item list. The IRS agreed with the test, not the item results.
- Dedicated process power needs load evidence. Thickness of a slab is not enough to make a foundation personal property.
- There is no separate IRS medical-office matrix. The pharmaceutical matrix is for plants, not clinics.
A single-story imaging clinic is constructed. The MRI and CT are personal property. The question is the chilled water, Faraday cage, and electrical service sized to those machines. Suppose, for arithmetic only, capitalized cost of $5 million with $800,000 assigned to land. Invented depreciable basis is $4.2 million, including equipment invoices. This page does not claim a utility reclass percentage.
The illustration applies Scott Paper-style documentation: what load is building, what load is equipment. Thickened slabs are not automatically personal property; the pharmaceutical matrix says thickness alone is not enough. That caution is used by analogy, not as a clinic statute.
Order of operations: land, 39-year medical office building, site work, equipment and dedicated utilities with evidence, inspection, reconciliation to basis (without double-counting vendor invoices), CPA on Form 4562. This is not a hospital.
Limits
This is not a hospital and not a copy of HCA’s classified list. Hospital Corporation of America & Subs. v. Commissioner, 109 T.C. 21 (1997), applied Whiteco and Scott Paper analysis to hospital components. The IRS Action on Decision 1999-008 agreed with the legal test — that the former investment-credit definitions still determine §1245 versus §1250 status under MACRS — and did not adopt every item result as a national list.
Use HCA for the test. Do not paste hospital millwork or nurse-station results into a suburban imaging clinic. There is no IRS medical-office matrix. Classification is fact-specific under Treas. Reg. §1.48-1.
Machines versus rooms
The MRI and CT, and the vendor-installed equipment packages, are personal property. Recovery period may follow an activity class in Publication 946 Appendix B, not automatically five years. This illustration does not pick a class number without that table in front of the reviewer.
Rooms around the machines — waiting, corridors, restrooms, the building envelope — are generally structural. A Faraday cage that exists solely to operate the MRI can be analyzed as equipment-related on its facts; a lead-lined wall that is the room’s construction may stay with the building. Describe function and permanence. Whiteco’s factors (whether the item is movable and has been moved, designed to stay, expected duration, ease of removal, damage on removal, manner of affixation) are the ATG’s standard test for “inherently permanent.”
Dedicated power and chilled water
Scott Paper Co. v. Commissioner allocated mill electrical systems by function. The ATG states that the IRS will not challenge functional allocation for primary and secondary electrical distribution, and that the §1245 share requires a design-load (demand-load) allocation. Copy that method only with load evidence. Do not extend it to plumbing or HVAC as an IRS-accepted method.
Chilled water that serves only the magnets is a process fact pattern; building chilled water that cools offices is not. Separate units whose sole justification is process temperature can be personal property under the §1.48-1 exception. A shared rooftop that cools the whole clinic is not allocated by square footage of the magnet room. Piggly Wiggly involved HVAC and an IRS nonacquiescence; do not treat it as a clinic rule.
Foundations and the pharmaceutical caution
If the property were a drug-manufacturing plant, the audit guide’s pharmaceutical matrix would apply: clean-room shells are building; HEPA and process utilities are personal property with an activity-class life; extra slab thickness is not enough. This clinic is not that plant. The thickness caution is still useful when looking at a housekeeping pad under a magnet. Specially designed equipment foundations can follow the machine on their facts; extra inches of concrete may not.
Do not relabel the entire floor plate as a 5-year foundation because one room is thicker.
Records, acquisition fork, and filing
New construction should use actual cost records: equipment contracts, electrical change orders, and pay applications. If this clinic were instead purchased as a going practice, read any written allocation. Peco Foods is a risk when §1060 writings exist; it is not assumed here. Reconcile vendor invoices so magnets are not estimated twice.
The CPA files Form 4562 and applies §168(k) as of Notice 2026-11 to qualified equipment. This page does not compute tax. CostSeg SI does not claim an operational engineer-certification product on this website. If a later look-back reclassifies historical clinic components already on a 39-year method, filing is generally Form 3115 / §481(a), referred to the CPA. Educational information, not tax advice.
Sources
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- 4IRS Publication 5653 — Cost Segregation Audit Techniques Guide (rev. 2-2025)(opens in a new tab)
Written for IRS examiners. The guide states it is not an official pronouncement of law and cannot be cited as authority. It predates the July 2025 law.
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- 7IRS Publication 946 — How To Depreciate Property (2025)(opens in a new tab)
Appendix B reproduces the Rev. Proc. 87-56 class lives.
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