Equipment Classification
Modular Office Classified as Equipment
vs. Improvement to Real Property
National Partitions' products are typically considered equipment and not improvement to real property, or materials by commonly used definitions.
Equipment is defined as an item intended to be used for production or manufacturing, not essential to the fixed works, building or structure, may be attached to realty without losing its identity and is removable without damage to the item or realty.
The National Partitions modular office is designed so that it can be taken down and moved to another location. Typically, when the modular office is moved the existing structure is left in its original state. The modular office represents personal property to the buyer. This meets the definition above for equipment.
Material usually refers to construction materials that are incorporated and attached to real property. Material losses its identity and becomes an integral and inseparable part of real property. This definition does not represent National Partitions modular office.
Distinguishing between the two definitions is important for depreciation and tax liabilities.
For instance, equipment such as a qualified modular office can be depreciated over seven years as opposed to conventional construction that is depreciated over 39.5 years. This represents a huge savings in favor of the modular office.
As a final note, federal and state governments all have their own definitions for equipment. Further, there may be other factors that must be considered for a modular office to qualify for the equipment depreciation etc.. We recommend a CPA be consulted to determine what rules apply to your application.
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