IRS Denies Bonus Depreciation For A Hotel Complex

The IRS has released field attorney advice (FAA 20140202F) denying bonus depreciation to the owner and operator of a hotel complex because the taxpayer failed to demonstrate when costs were incurred for each property.

The taxpayer owned and operated a hotel complex consisting of several adjacent buildings including a casino, a hotel, a restaurant, a convention center and parking structures. The taxpayer completed four separate construction projects involving existing buildings at the hotel complex. The IRS focused its guidance on one of the projects as representing the others. After the project was completed, the taxpayer engaged a consultant to perform a cost segregation study. The cost segregation study allocated the total costs to each identified asset as a 5-, 7-, 15- or 39-year property. The study, however, did not identify the dates the costs were incurred for each asset.