Rev. Rul. 67-67

Advice has been requested whether taxpayer's floating dock qualifies as "section 38 property" for investment credit purposes.

The dock, which is located in a yacht harbor, provides a walkway to the land and a number of uncovered berths, also referred to as slips. The berths are rented primarily to individual yacht and boatowners who are not in the transportation business. Prefabricated partitions are affixed to the walkway to form the berths, which have electrical and plumbing outlets. The entire floating dock is permanently anchored by guiding sliprings around fixed pilings which are driven into the harbor bottom. One of the primary advantages of this floating dock over a nonfloating dock is that it can rise and fall with the change in water level, so that a boat secured to the dock will always remain at the same level as the walkway.

Section 48 of the Internal Revenue Code of 1954 provides, in part, that for property to qualify as "section 38 property" for investment credit purposes, it must be either (1) "tangible personal property," or (2) "other tangible property" (not including a building or its structural components) but only if such other property is used as an integral part of manufacturing, production, or extraction, or as an integral part of furnishing transportation, communications, electrical energy, gas, water, or sewage disposal services, or constitutes a research or storage facility used in connection with any of these activities.

"Tangible personal property," as defined in section 1.48-1(c) of the Income Tax Regulations, includes all tangible property except land and improvements thereto, such as buildings or other inherently permanent structures (including items which are structural components of such buildings or structures). In addition, all property which is in the nature of machinery (other than structural components of a building or inherently permanent structure), shall be considered "tangible personal property" even though located outside a building.

"Other tangible property," to qualify as "section 38 property," under section 1.48-1(d) of the regulations, as an integral part of furnishing transportation, communications, electrical energy, gas, water, or sewage disposal services, must be property used in a trade or business of furnishing such services.

Whether the dock can qualify as "section 38 property" depends upon whether it can qualify as "tangible personal property," or as "other tangible property" used as an integral part of one of the specified activities. The floating dock will not qualify as "tangible personal property" if it is an inherently permanent structure within the meaning of section 1.48-1(c) of the regulations when placed in service. In this case, the dock and its anchorage were built to be used as a unit in place of a similar nonfloating berthing facility annexed to the ground. Therefore, by reason of its nature and use, regardless of how classified by local law, the dock is an inherently permanent structure and does not qualify as "tangible personal property." However, it may qualify as "other tangible property" under section 1.48-1(d) of the regulations if it is used as an integral part of one of the specified business activities listed within this section. In this case, however, the dock is not used as an integral part of one of the specified activities.

Accordingly, the taxpayer's floating dock is not "section 38 property" for investment credit purposes.