Specialized Equipment Decisions
Production machinery, medical equipment, and kitchen equipment are the regulation’s core examples of personal property. Foundations, racks, and hook-ups follow the equipment only when the facts support it. Integration with the building can pull equipment-like items back into §1250.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- The regulation names production machinery and printing presses as tangible personal property.
- L.L. Bean held that a storage-rack system that supported roof and walls was a structural component, and distinguished a specially reinforced process floor described in Texas Instruments.
- Scott Paper treated process-serving primary electric as personal property on a mill record. Dedicated hook-ups still need proof.
- Educational information, not tax advice.
When an item is clearly machinery used in a process, classification is usually straightforward. The harder cases are the pads, pits, catwalks, racks, and utility drops around the machine. The auto-manufacturing and pharmaceutical matrices in the audit guide keep process systems with the equipment class and building systems with the building. Matrices cannot be cited as law.
L.L. Bean, Inc. v. Commissioner, 145 F.3d 53 (1st Cir. 1998), is the limit case that was fully opened. A Freeport, Maine reserve facility used floor-to-ceiling racks as the structural support for the roof and three walls. The First Circuit held that dual-purpose rack was a structural component. Display racks in the regulation’s examples qualify when they sit in a building; they do not qualify when the building would collapse without them. The mezzanine in the 1986 shipping building supported a floor and carried lighting, sprinklers, and communications. Six to eight workers and more than a month to strip it — plus disconnect time — was not King Radio movability.
The First Circuit distinguished Texas Instruments Inc. v. Commissioner, T.C. Memo. 1992-306, as a case in which a specially constructed and reinforced concrete floor supported machinery and was treated as part of the machinery. The Leagle page for Texas Instruments returned only a header on this pass, so this library does not invent that memorandum’s other item results. The audit guide table lists waste-treatment facilities and an electrical switchgear structure as §1245, and drywall partitions and a water-pump structure as §1250, in that case. Those table rows stay flagged until the opinion text is opened.
Scott Paper allocated mill electrical cost that served production machinery. Morrison allowed kitchen panel boards that served only kitchen equipment and denied floors, tile, and hand sinks. A.C. Monk denied a high bay and a railroad dock that could be reused by the next manufacturer. Consolidated Freightways is cited in the audit guide for truck docks and dock lighting as §1250; that Ninth Circuit text was not opened here and is not quoted.
Boddie-Noell rejected unreliable cost estimates for restaurant equipment-related claims. Proof of what the equipment is, what it costs, and how it is tied to the building still matters as much as the noun on the takeoff. Super Intelligence is proposed only. This page is educational information, not tax advice.
Do not copy a matrix row
Matrices are examiner guidance. They cannot be cited as law. They are useful as a map of what the IRS has thought about in those industries. A pharmaceutical extra-slab note does not decide a warehouse mezzanine.
Source limits
Texas Instruments and Consolidated Freightways are described from L.L. Bean and the audit guide table, not from fully opened opinions. See docs/_audit_work/flags-cases.md.
How to use this page
Use Scott Paper and Morrison when the dispute is dedicated power or kitchen panels that serve machines. Use L.L. Bean when the “machine” is also holding up the building. Use A.C. Monk when the next user could reuse the high bay or dock. Do not treat a specially reinforced process floor, as later described in L.L. Bean’s discussion of Texas Instruments, as a reason to pull every thickened slab out of a warehouse.
The pharmaceutical and auto matrices in the audit guide are examiner maps for those industries. They cannot be cited as law, and they do not decide a mezzanine that supports a floor and carries sprinklers. Boddie-Noell remains the reminder that even a machine-related claim fails if the cost is a percentage invented after the fact.
Educational information, not tax advice.
Limits and flags
Texas Instruments is described from L.L. Bean and the audit guide table because the Leagle page returned only a header. Do not invent that memorandum’s other item results. Consolidated Freightways remains an unopened audit-guide citation for docks and dock lighting. Those limits are recorded in docs/_audit_work/flags-cases.md.
L.L. Bean is a First Circuit warehouse in which the racks were the walls. A free-standing storage rack that does not support the building is a different fact. A.C. Monk’s high bay and railroad dock failed because they could be reused; that adaptability holding is forum-limited in the audit guide. Boddie-Noell remains a reminder that equipment-related claims still fail without reliable costs.
Super Intelligence is proposed only. Educational information, not tax advice.
Practice note
Start from the machine and walk outward. The press or imaging unit is usually personal property. The pad, pit, catwalk, rack, and utility drop are not automatic. L.L. Bean stops the walk when the rack is also the wall. Texas Instruments, as later described, is the opposite walk: a floor built for the machine can stay with the machine — and that memorandum was not fully opened here.
Dedicated power can follow Scott Paper or Morrison on a documented load. Dedicated plumbing does not inherit that IRS-acceptance sentence (flag F-09). A.C. Monk’s reusable high bay is a Fourth Circuit adaptability warning, not a nationwide dock rule.
Sources
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- 7IRS 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.