Shopping Centers
A shopping center is a group of 39-year buildings plus 15-year site work. The retail matrix is the closest IRS table, written for department and grocery stores. Who owns the interior work decides whose basis it is, and a written purchase allocation can bind the parties under Peco Foods.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- Mall shells, strip-center buildings, and common-area buildings are generally 39-year nonresidential real property.
- Parking fields are typically class 00.3, 15-year land improvements; parking decks are 39-year buildings in the retail matrix and ATG Chapter 8.B.
- A landlord generally uses each tenant’s activity class for activity-category property, per the ATG’s citation of Treas. Reg. §1.167(a)-11(e)(3)(iii).
- Landlord-funded interiors may be QIP for the landlord if §168(e)(6) is met; tenant-funded interiors are the tenant’s property.
- Peco Foods held a buyer to written allocation schedules; that risk arises in applicable asset acquisitions, not in every real-estate closing.
- Bonus depreciation as of 2026 can apply to qualified fixtures, site work, and QIP acquired after January 19, 2025, not to the 39-year shells.
Shopping centers combine multiple retail buildings, a parking field, and sometimes a garage. Each building is generally 39-year nonresidential real property. Publication 5653 Chapter 7.B is the closest IRS table, even though it was written for department and grocery stores. The ATG says a matrix reflects one industry’s general fact pattern and may not apply to another. Using grocery rows on a mall common area is an analogy and should be labeled as one.
Anchor fixtures belong to whoever bought them. Gondolas, showcases, and refrigerator cases are 5-year class 57.0 property in the retail matrix when those facts exist. Treas. Reg. §1.48-1(c) already lists grocery counters, display racks, and signs as tangible personal property. Common-area décor that is not needed to operate the building can be personal property under the ATG decorative-lighting and decorative-millwork tests; primary mall lighting, restrooms, and central HVAC stay with the building under Treas. Reg. §1.48-1(e)(2).
A landlord’s activity class follows each tenant’s use. The ATG (Chapter 6.C.5) cites Treas. Reg. §1.167(a)-11(e)(3)(iii) for that lessor rule. A grocery wing and a professional-office wing on the same parcel can therefore support different activity classes for the §1245 assets in each space. Asset-category property such as class 00.3 land improvements and class 00.11 office furniture is classified first under Rev. Rul. 2003-81.
Peco Foods, Inc. v. Commissioner, T.C. Memo. 2012-18, aff’d No. 12-12169 (11th Cir. 2013) (unpublished), held a buyer to Form 8594-style allocation schedules in purchase agreements for two processing plants. A later cost segregation study could not break those allocated assets into shorter-lived pieces. The ATG notes that how far that written-allocation rule extends beyond §1060 acquisitions is unclear. Read any allocation schedule before commissioning take-offs. Do not assume Peco applies to every shopping-center deed.
Site work is usually the largest shorter-lived category on a center: ring roads, lot lighting poles, perimeter fences, and landscape islands as class 00.3. Pylon signs often split between a 15-year structure and a 5-year face, as the casino matrix illustrates for pylons; apply the split by function. A parking deck is a building, not a 15-year lot.
This page is educational information, not tax advice. Proposed Super Intelligence site maps are explanatory only.
Buildings, lots, and decks
Treas. Reg. §1.48-1(e)(1) lists stores as buildings and includes structures that provide parking or sales space. ATG Chapter 8.B treats stand-alone open-air parking structures as 39-year buildings and says penalties should be strongly considered for 15-year positions on those structures. Surface lots, striping, curbs, and sidewalks remain 00.3 in Chapter 7.B.
Do not treat a podium garage and a surface lot as one 15-year asset. Split by what was built. Attached trash enclosures and building-protection bollards are building in other matrices; bollards that protect inventory or site items can be 00.3.
Landlord versus tenant interiors
Section 168(e)(6) requires that QIP be an improvement made by the taxpayer to an interior portion of a nonresidential building after the building was first placed in service. Enlargements, elevators, and internal structural framework are excluded. A landlord-funded refresh can be QIP for the landlord; a tenant-funded build-out is the tenant’s property and may be QIP for the tenant.
First-generation space that is part of placing the building in service is not QIP. Who paid an allowance, who owns the improvement at the end of the lease, and whether the work is an enlargement are CPA questions. Do not treat every vanilla-box suite as 15-year property.
Documentation
Site plans, parking-structure drawings, tenant-improvement ledgers, fixture invoices, and any purchase-agreement allocation schedules are the records Chapter 4 expects. New centers can use contractor pay applications. Acquired centers need land valued first and estimates reconciled to price without a pro-rata step-up.
A rent roll that identifies each tenant’s use supports activity-class selection. Photographs of flooring adhesives and of whether a canopy is stand-alone or building-attached prevent importing Rev. Rul. 2003-54 onto a mall entrance canopy that is part of the roof.
Bonus depreciation as of 2026
Qualified property acquired after January 19, 2025 is eligible for 100% bonus depreciation under Notice 2026-11. The 39-year buildings and parking decks are not qualified property. Fixtures, qualifying décor, 15-year site work, and QIP can be. Binding contracts on or before January 19, 2025 stay on the phase-down.
Used fixtures can qualify if the taxpayer did not previously use them and related-party limits are met. Property required to use ADS is not bonus-eligible. Educational information, not tax advice.
Limits
There is no IRS shopping-center matrix. Do not invent a typical common-area reclass percentage. AmeriSouth is an apartment case and does not classify mall millwork.
Mixed-use centers with apartments over retail are a §168(e)(2) problem discussed on the mixed-use page. Run the 80% test on each building before applying this page’s 39-year assumption.
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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