Tangible Assets Used In Converting Corn To Fuel Grade Ethanol Are Properly Included In Asset Class 49.5

A certain important person in my reality - my wife - is becoming increasingly interested in the business end of biomass refineries. You go girl. Funny but this interest also happens to correlate with a new file I am developing involving a farmer who owns an ethanol plant so hopefully we will be taking another journey together. What I am quickly learning is that valuation in this particular file really is all about the asset list, depreciation schedule, useful life, salvage value and the significance of having the assets properly categorized (to clean up the tax returns).  It is a mess. From my warped perspective there is no better way to understand the business end of a refinery then to start with assets. So honey feel welcome to contribute to your heart's content...

In conducting research I came across IRS Revenue Ruling 2014-17 stating tangible assets used in converting corn to fuel grade ethanol are properly included in asset class 49.5 of Rev. Proc. 87-56,1987-2 C.B. 674, for depreciation purposes. Even though this ruling only applies to assets placed in service on or after June 9, 2014 it was helpful in understanding the nuances of Asset Class 49.5.

Asset Class 49.5 has a "Class Life" of 10 years and "Recovery Periods" of 7 years using General Depreciation methods and 10 years using Alternative Depreciation methods. This asset class specifically "includes assets used in the conversion of refuse or other solid waste or biomass to heat or to a solid, liquid, or gaseous fuel. Also includes all process plant equipment and structures at the site used to receive, handle, collect, and process refuse or other solid waste or biomass to a solid, liquid, or gaseous fuel or to handle and burn refuse or other solid waste or biomass in a waterwall combustion system, oil or gas pyrolysis system, or refuse derived fuel system to create hot water, gas, steam and
electricity. Includes material recovery and support assets used in
refuse or solid refuse or solid waste receiving, collecting, handling, sorting, shredding, classifying, and separation systems. Does not include any package boilers, or electric generators and related assets such as electricity, hot water, steam and manufactured
gas production plants classified in classes 00.4, 49.13, 49.221, and 49.4. Does include, however, all other utilities such as water supply and treatment facilities, ash handling and other related land improvements of a waste reduction and resource recovery plant.

Revenue Ruling 2014017 will be in IRB 2014-24, dated June 9, 2014.

 

John R. Dundon, EA [720-234-1177, John@JohnRDundon.com]. John is a lifelong student of the US Tax Code; enrolled with the United States Treasury Department to practice before the IRS (Enrolled Agent # 00085353); under contract with the IRS as a Certified Individual Taxpayer Identification Number (ITIN) Acceptance Agent; regulated under USC 31 Section 330 & USC 26 Section 7525a.3.A; governed under US Treasury Cir. 230.

Tagged with: , , ,
Posted in Asset Classification, Depreciation, Husband/Wife, Tax Guidance & Preparation, Tax Problems & Requests, Uncertain Tax Position

Leave a Reply

Subscribe via Email

Schedule an Appointment
QuickBooks Advanced Certified ProAdvisors Online

QuickBooks Certified ProAdvisor - QuickBooks Online Advanced Certification