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.