Court case · 1974
Thirup v. Commissioner
508 F.2d 915 (9th Cir. 1974)
U.S. Court of Appeals, 9th Circuit
Taxpayer won
The facts
Arne and Pauline Thirup grew cut flowers for sale. They built and improved greenhouses and claimed the section 38 investment credit on them. The IRS disallowed the credit because it said the greenhouses were buildings under section 48, and the Tax Court agreed with the IRS.
What the court decided
The Ninth Circuit reversed. It rejected the appearance test and applied a functional test: a greenhouse whose principal function is providing the controlled growing environment for the crop, where human activity inside is incidental, is not a 'building' under section 48, so the investment credit was allowed.
Why it matters for your study: Thirup is the classic greenhouse case. It teaches that courts look at what a structure does, not what it looks like. One note for today: Congress later gave commercial greenhouses their own category, single purpose horticultural structures, under section 168(i)(13). Those now get a set 10-year life. So we cite Thirup for its function-over-form test, not to promise a 5-year life on a greenhouse.
Parts the case looked at
- greenhouses
Background
The Thirups ran a cut flower business. They built and improved greenhouses and claimed the section 38 investment credit on them. The credit was only available for certain property, and section 48 excluded buildings.
The IRS disallowed the credit, saying a greenhouse is a building. The Tax Court agreed with the IRS. The Thirups appealed to the Ninth Circuit, which decided the case in their favor in 1974.
What it established
The Ninth Circuit rejected the idea that a structure is a building because it looks like one. That is the appearance test, and the court said it asks the wrong question.
Instead the court applied a functional test. The question is what the structure does. These greenhouses existed to create and hold the controlled growing environment the flower crop needed. Human activity inside was incidental to that function. A structure like that is not a building under section 48, so the investment credit was allowed.
How it shows up in a study
Thirup is foundational authority for the building-versus-structure call. When a study analyzes whether something is a building or a special-purpose structure, the functional test from Thirup is part of the framework, alongside the later permanence cases.
It comes up for agricultural and horticultural facilities, including modern grow facilities. The analysis documents the structure's function, how the crop drives the design, and how limited the human workspace really is. Thirup goes in Appendix A as the source of the function-over-form principle.
What it does not mean
Thirup does not give greenhouses a 5-year life today. After this case, Congress created a specific category for commercial greenhouses: single purpose agricultural or horticultural structures under section 168(i)(13). Under sections 168(i)(13) and 168(e)(3)(D)(i), most commercial greenhouses now carry a set 10-year MACRS recovery period.
So a study cites Thirup for its building-definition test, not as current-life authority for greenhouses. Anyone promising a 5-year greenhouse from this case is reading it about 50 years out of date.
Primary source
Read the official text for yourself, or share it with your advisor.
- Category
- Asset classification
- Outcome
- Taxpayer won
- Applies to
- Agricultural, Horticultural, Greenhouse, Cannabis Grow
- Status
- Vetted
This page explains a tax authority in plain words. It is not tax advice for your situation. The way this authority applies to your property is reviewed by a licensed tax professional. Citation is provided so you or your advisor can read the primary source.