15-Year Recovery Period for Certain Restaurant Property

Before the enactment of the AJCA, if a leasehold improvement constituted an addition or improvement to nonresidential real property already placed in service, the improvement had to be depreciated using the straight-line method over 39 years, under Sec. 168.

New Law

AJCA Section 211 requires that qualified restaurant property be depreciated using the straight-line method and a 15-year recovery period. Qualified restaurant property is defined as any improvement to a building if such improvement is placed in service more than three years after the date the building was first placed in service and more than 50% of the buildings square footage is devoted to the preparation of, and seating for, on-premises consumption of prepared meals.

Effective Date

The provision is effective for property placed in service after Oct. 22, 2004.

From Jane Rohrs, Washington, DC