Code section · 1976
IRC §280B
26 U.S.C. §280B; Treas. Reg. §1.280B-1; Rev. Proc. 95-27, 1995-1 C.B. 704; De Cou v. Commissioner, 103 T.C. 80 (1994); Notice 90-21
Internal Revenue Code
What it holds
On the demolition of a structure (a building and its structural components, Treas. Reg. §1.280B-1(b)), the demolition costs and any loss on account of the demolition, in practice the remaining adjusted basis, are not deductible and are added to the basis of the land. A modification is not a demolition under the Rev. Proc. 95-27 safe harbor when at least 75% of the existing external walls stay in place as internal or external walls and at least 75% of the internal structural framework stays in place. Failing the safe harbor does not by itself make the work a demolition. A loss from a casualty or extraordinary obsolescence before the demolition is not disallowed (De Cou).
Why it matters for your study: Renovation planning and retired components. Inside the safe harbor, retired components can be written off: separately classified §1245 or 15-year assets as ordinary dispositions, structural components through the partial disposition election on the timely return (Treas. Reg. §1.168(i)-8(d)(2)). Removal costs are then not capitalized (Treas. Reg. §1.263(a)-3(g)(2)(i)). §280B overrides the disposition rules when the work is a demolition.
- Category
- Tangible property regs
- Applies to
- All property types
- Status
- Vetted
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