Under tax law, depreciation starts when the property is “placed in service.” What does this mean? In a recent case involving two retail stores, the IRS argued it means “open for business,” but a district court allowed depreciation once the buildings were fully functional (e.g., shelves were stocked and the buildings received their certificates of occupancy) even if not open for business. This case arose in the GO Zone that was set up to create tax breaks for the area hard hit by Hurricane Katrina; the taxpayer here was trying to take advantage of just such a special break.
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