Seven-Year Recovery Period for Motorsports Racetrack Complexes

A taxpayer generally must capitalize the cost of property used in a trade or business and recover such cost over time, through annual deductions for depreciation or amortization. Land improvements (such as roads and fences) are recovered over 15 years. An exception exists, however, for the theme and amusement park industry, whose assets are assigned a seven-year recovery period.

New Law

AJCA Section 704, modifying Sec. 168, assigns a seven-year modified accelerated cost recovery system period to motorsports racetrack complexes (which include land improvements and support facilities, but not transportation equipment, warehouses, administrative buildings, hotels or motels).

Effective Date

The provision is effective for property placed in service after Oct. 22, 2004 and before 2008.

Implications

Because of the nature of racetrack assets, taxpayers took different positions on them. Some treated them as land improvements, others treated them as amusement or theme park property, and still others deemed them nonresidential real property. This provision resolves any controversy for the effective years, by providing a favorable seven-year recovery period, similar to that available to amusement and theme park assets.

From Jane Rohrs, Washington, DC