Illustrative Retail Property
A hypothetical grocery using the IRS retail matrix for fixtures, strippable flooring, and a parking field. Educational information, not tax advice.
Educational information, not tax advice.
Updated 2026-10-14
Assumptions
- Educational information, not tax advice.
- Assume a grocery prototype built on a pad, not a purchase of a going chain with a written §1060 allocation. If this were an acquisition of a going store, Peco Foods would be a risk to read.
- Assume the Publication 5653 retail matrix (department or grocery) is the closest examiner table. It is not a statute.
- Any dollar figures below are invented for arithmetic only. They are not a typical mix and not a client result.
Key takeaways
- Fixtures and strippable floor covering are 5-year in the retail matrix; ceramic tile and the building are 39-year.
- The parking structure, if any, is not 15-year paving. Lots, including islands and perimeter fence, are usual 15-year candidates.
- Building-protection security stays with the building in that matrix; article-surveillance pedestals at the doors are 5-year.
- The example shows how to use an IRS matrix as a map while still inspecting the actual store.
A grocery prototype is built on a pad. The study maps gondolas, refrigerated cases, and VCT to 5-year rows in the retail matrix, ceramic restroom tile to the building, and the lot — including islands and perimeter fence — to 15-year land improvements. Suppose, for arithmetic only, capitalized project cost of $7 million of which $1 million is land. Invented depreciable basis is $6 million. No fixture percentage is claimed.
Building-protection security stays with the building in that matrix; article-surveillance pedestals at the doors are 5-year. Readily removable awnings and certain canopies appear in the same table with their own rows; footings are not the canopy. Copy only what the inspection supports.
Because this is new construction, actual cost records — pay applications, change orders, vendor invoices for cases — are the audit guide’s preferred approach. Land still comes out first. Soft costs capitalized under §263A, if any, ride along; this page does not compute §263A.
Teaching purpose
The example shows how to use an IRS matrix as a map while still inspecting the actual store. Publication 5653 chapter 7.B is the retail industries matrix (department or grocery). Floor covering in strippable adhesive — for retail, all VCT, sheet vinyl, and carpeting — is treated as 5-year. Permanently affixed ceramic tile, wood, and epoxy are 39-year. Gondolas, showcases, and refrigerator cases are 5-year fixtures in that table.
The matrix is a 2004 field directive reprinted in the 2025 audit guide. It is examiner guidance. Boutique or warehouse-club facts can differ. Matrices warn they may not apply outside their industry.
Site and canopies
Parking lots, including striping, curbs, and perimeter fences, are 15-year. Parking structures are 39-year buildings. The IRS has said penalties should be strongly considered for treating a parking structure as 15-year paving. Do not relabel a garage as a lot.
Readily removable awnings and bolt-anchored gas-pump canopies not attached to buildings are 5-year in the retail matrix; canopy footings are 15-year. A grocery vestibule canopy attached to the building is not automatically Rev. Rul. 2003-54 (gasoline pump canopies). Attachment and function have to be described.
Security, millwork, and electrical
Security systems that protect the building are building in the retail matrix; anti-shrink article surveillance is 5-year. The same product family can land in two classes depending on what it protects. Cabinetry in sales areas can be 5-year in retail rows; restroom and office cabinetry is building in related matrices. Inspect, then cite.
House lighting and general distribution stay with the building. Dedicated circuits to refrigerated cases can follow the cases if the facts and the matrix row match. Scott Paper functional allocation, if used at all, is limited in the ATG to primary and secondary electrical distribution, with design-load support. Do not extend that method to refrigeration piping as an IRS-accepted approach.
Records and inspection
AIA pay applications list millwork, electrical, refrigeration, and site work. Assign those lines to recovery classes using drawings and inspections, then prove the sum equals capitalized basis. Change orders must be included or the reconciliation fails. A case vendor invoice already in the equipment account should not be estimated a second time out of the building residual.
Walk the sales floor, back room, restrooms, and lot. Photograph whether VCT is strippable, whether gondolas are bolted, and whether the vestibule canopy is attached. If this prototype were instead a purchase of a going grocery, read any written allocation; Peco Foods is a risk when a §1060 writing exists, and it is not assumed to apply to every store closing. CostSeg SI describes extraction and estimation as proposed Super Intelligence stages, not as operational claims that drawings are classified without review. The ATG’s quality elements still apply: cite sources, reconcile, and identify §1245 property without creative labels.
Bonus overlay and filing
Self-constructed property is generally treated as acquired for bonus purposes when construction begins. Notice 2026-11 applies the existing Treas. Reg. §1.168(k)-2 acquisition-date rules with the January 19, 2025 line. A pad started under a binding contract before January 20, 2025 can remain on the phase-down even if the store opens in 2026. The study classifies. The CPA applies the rate on Form 4562.
This illustration does not compute a taxpayer’s tax and does not present a reclass percentage as typical. Educational information, not tax advice.
Sources
- 1IRS 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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