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American Jobs Creation Act of 2004 Reduces Recovery Period

Date

November 17, 2004

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2 minutes

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On October 22, 2004, President Bush signed the American Jobs Creation Act of 2004. The Act amends the existing depreciation provisions of the Internal Revenue Code to shorten the depreciation period for certain types of leasehold improvements and restaurant property which are placed in service prior to January 1, 2006.

15-Year Recovery Period

The Act amends existing Section 168 to add a new 15-year recovery period under the Modified Accelerated Cost Recovery System for "qualified leasehold improvement property" and "qualified restaurant property" placed in service prior to January 1, 2006. For property placed in service after December 31, 2005, the recovery period reverts to 39 years.

Qualified Leasehold Improvement Property

Qualified leasehold improvement property is any improvement to an interior portion of a nonresidential building, provided that the:
(a) improvement is made pursuant to a lease of such portion by the lessee or the lessor
(b) improved portion is to be occupied exclusively by the lessee
(c) improvement is placed in service more than three years after the building was placed in service

Building enlargements, elevators or escalators, structural components benefiting a common area or improvements to the internal structural framework of the building are all excluded from the definition of qualified leasehold improvement property, however.

Qualified Restaurant Property

Qualified restaurant property is any improvement to a building in which more than 50 percent of the building is devoted to the preparation of and seating for on-premises consumption of food, provided that the building must have been placed in service more than three years prior to the date on which the improvement is placed in service.

Effective Date
The Act applies to improvements placed in service after October 22, 2004.

 

Circular 230 Disclaimer
In conformity with U.S. Treasury Department Circular 230 this document and any tax advice contained herein is not intended to be used, and cannot be used, for the purpose of avoiding penalties that maybe imposed under the Internal Revenue Code, nor may any such tax advice be used to promote, market or recommend to any person any transaction or matter that is the subject of this document. The intended recipients of this document are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this document.


Filed under: Corporate

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