Illustrative Specialized Equipment
A hypothetical bottling line used to keep process utilities with the equipment class and building utilities with the building. Educational information, not tax advice.
Educational information, not tax advice.
Updated 2026-10-14
Assumptions
- Educational information, not tax advice.
- Assume a bottling line installed in an existing 39-year building. The line is new. The building class does not change.
- Activity class, not 5-year-by-default, may set the recovery period. This illustration does not pick a class number without Publication 946 Appendix B in front of the reviewer.
- No conclusion is reached on §168(n) for the building. That election, if it were ever in view, is a CPA discussion (F-03).
- Any dollar figures below are invented for arithmetic only. They are not a typical mix and not a client result.
Key takeaways
- The machine is personal property. Dedicated process stainless and dedicated electrical can follow it on the facts.
- Specially designed foundations can follow it; extra thickness may not. The pharmaceutical matrix’s thickness caution is used as a warning, not as a bottling statute.
- Activity class, not 5-year-by-default, may set the recovery period. Rev. Rul. 2003-81 distinguishes asset category from activity category.
- Building HVAC, restrooms, and house lighting stay with the 39-year building.
A bottling line is installed in an existing 39-year building. The line, process stainless, and dedicated electrical are personal property. Recovery period may be the activity class for beverage manufacture in Publication 946’s tables, not automatically five years. Suppose, for arithmetic only, the line package is a $2 million capitalized invoice plus $400,000 of contractor process utilities. Invented figures; no tax computed.
The pharmaceutical matrix’s note that extra slab thickness is not enough is used as a caution when looking at the line’s housekeeping pad. This plant is not a drug facility. The caution still travels.
Order of operations: confirm the building remains 39-year property; capitalize the line under the tangible property regulations as an acquisition of personal property plus any building improvements; classify process utilities with evidence; leave building utilities with the building; inspect; reconcile invoices so the line is not estimated twice; CPA files Form 4562, including bonus dates under Notice 2026-11.
Class lives
Rev. Proc. 87-56 classes are reproduced in Publication 946 Appendix B. This illustration does not pick a class number without that table in front of the reviewer. Asset classes (for example, office furniture 00.11) are checked first; then activity classes. Rev. Rul. 2003-81 is the reminder to use both. A lessor generally uses the lessee’s activity. Personal property with no class life defaults to 7 years by statute — do not default before the table is checked.
Beverage-manufacture activity classes, if they apply, can produce a recovery period other than five years. Office furniture in a plant office is still class 00.11. Mixing those on one line is an error.
Foundations and pads
A housekeeping pad poured as extra floor thickness is often still the building. Specially designed foundations, pits, or isolation masses that exist solely to hold the line can follow the equipment on their facts. The pharmaceutical and auto-manufacturing matrices draw that distinction for their industries. Increased thickness alone is not sufficient. Do not relabel the entire floor plate.
Catwalks that exist only to access the line can be personal property in those matrices; building mezzanines that add floor area stay 39-year. Describe function.
Process utilities versus building utilities
Process stainless, CIP piping, and dedicated electrical feeds are personal-property candidates. Scott Paper supports a load-based split of primary and secondary electrical distribution. Do not extend that IRS-accepted method to process plumbing as a functional-allocation percentage. Dedicated process pipe can still be personal property on its own facts and invoices.
Building chilled water, house air, restrooms, and general lighting stay with the building. A makeup-air unit whose sole justification is process humidity can be personal property under the §1.48-1 exception; a rooftop that cools the whole box is not allocated by the footprint of the filler.
Bonus, QPP, and building class
The line, if acquired after January 19, 2025 and otherwise qualified, is in the 100% additional first-year depreciation regime as of Notice 2026-11. A binding contract dated earlier stays on the phase-down. Used components have extra tests. This page does not compute tax and does not present a first-year allowance as typical.
Installing a line does not convert the existing 39-year building into qualified production property. Section 168(n) is a separate, temporary, elective allowance with construction and use tests and excluded spaces. It is an election to discuss with a CPA. This illustration reaches no eligibility conclusion.
Inspection and filing
Photograph the line, pads, catwalks, and panel directories. Tie vendor invoices to those photos. Reconcile the invented $2.4 million process package without pulling building restorations into the equipment class. If the contractor also replaced a roof, that roof is a building restoration under Treas. Reg. §1.263(a)-3, not part of the filler. Soft costs that were capitalized with the line ride along; this page does not compute §263A.
The CPA files Form 4562. If the existing building had been depreciated as one 39-year asset and this study also looks back at historical components, that is a separate Form 3115 discussion, referred to the CPA. Installing a new line does not, by itself, reclassify the 1990s box. Educational information, not tax advice.
Sources
- 1IRS Publication 946 — How To Depreciate Property (2025)(opens in a new tab)
Appendix B reproduces the Rev. Proc. 87-56 class lives.
- 2IRS 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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