Power Plants Mounted on Barges
Power plants mounted on barges probably do not qualify for faster depreciation as “vessels,” the IRS suggested.
An IRS agent in the field went to the national office with a question about how to depreciate a three-story building mounted on a barge docked somewhere in the US. The owner of the barge was depreciating the entire asset over 10 years as if it were a “vessel.” The national office urged the agent to get more facts, but said it thought that a structure built on top of a barge should be depreciated as a “building” over 39 years. The IRS made its comments in a recent “field service advice” to the agent.
US companies must depreciate assets located in foreign countries on a straight-line basis over the class life — usually 22 or 28 years in the case of a power plant. However, a US-flag vessel used in US foreign or domestic commerce can be depreciated over 10 years using the 200% declining-balance method — even if located abroad. Some US companies have considered claiming, where a power plant is mounted on a barge, that the entire asset is a US-flag vessel.