J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

42.12 MACRS for Real Estate Placed in Service After 1986

The recovery period for residential rental property placed in service after December 31, 1986, is 27.5 years. The recovery period for nonresidential real property is either 39 years or 31.5 years, depending on when the property was placed in service.

The method of recovery for nonresidential or residential property is the straight-line method using a mid-month convention. See the next page for rate tables for each class of property.

For nonresidential real property placed in service after December 31, 1986, but before May 13, 1993, the depreciation recovery period is 31.5 years.

For nonresidential real property placed in service after May 12, 1993, the recovery period is 39 years. Under a transition rule, the 31.5-year recovery period rather than the 39-year recovery period applies to a building placed in service before 1994 if before May 13, 1993, you had entered into a binding, written contract to buy or build it, or if, before that date, you had begun construction. The transition rule also applies if you obtained the contract or property from someone else who satisfied the pre–May 13, 1993, contract or construction requirement, provided he or she never put the building in service and you did so before 1994.

Residential rental property subject to the 27.5 year recovery period is defined as a rental building or structure for which 80% or more of the gross rental income for the tax year is rental income from dwelling units. ...