Rev. Rul. 67-51, 1967-1 CB 68
REV-RUL, Definitions and special rules., Rev. Rul. 67-51, 1967-1 CB 68, (Jan. 01, 1967)
SECTION 179.--ADDITIONAL FIRST-YEAR DEPRECIATION ALLOWANCE FOR SMALL BUSINESS
26 CFR 1.179-3: Definitions and special rules.
Trees of fruit orchards or groves do not qualify as tangible personal property
within the meaning of section 179 of the Internal Revenue Code of 1954.
Advice has been requested whether trees of a fruit orchard or grove purchased and held for the production of income qualify for the additional first-year depreciation allowance provided for by section 179 of the Internal Revenue Code of 1954.
Section 179 of the Code provides that a taxpayer, other than a trust, may elect for the first taxable year in which a depreciation deduction is allowable on tangible personal property to take an additional allowance of 20 percent of the cost or of a portion of the cost of such property. The additional allowance applies only to tangible personal property of a character subject to the allowance for depreciation under section 167 of the Code, acquired by purchase after December 31, 1957, for use in the taxpayer's trade or business or for the production of income, and which has an estimated useful life (determined at the time of acquisition) of 6 years or more.
Section 1.179-3(b) of the Income Tax Regulations provides that for purposes of section 179 of the Code the term "tangible personal property" includes any tangible property except land, and improvements thereto, such as buildings or other inherently permanent structures thereon and their structural components.
It seems well settled that trees are part and parcel of the land in which they are rooted and, thus, realty which passes to the purchaser with the purchase of the land. Accordingly, such trees of a fruit orchard or grove purchased and held for the production of income are in the nature of land and are not tangible personal property within the meaning of section 179 of the Code.
However, trees of fruit orchards or groves purchased and held for the production of income qualify as "other tangible property" under section 48(a)(1)(B) of the Code and section 1.48-1(d) of the regulations for purposes of the investment credit allowed by section 38 of the Code. See Rev. Rul. 65-104, C.B. 1965-1, 28.