PUBLIC LAW 99-514—OCT. 22, 1986
100 STAT. 2125
"(5) CERTAIN PROPERTY PLACED IN SERVICE IN CHURNING TRANSACTIONS.— "(A) IN GENERAL.—Property—
"(i) described in paragraph (4) of section 168(e) (as in effect before the amendments made by the Tax Reform Act of 1986), or "(ii) which would be described in such paragraph if such paragraph were applied by substituting '1987' for '1981' and '1986' for '1980' each place such terms appear. "(B) SUBPARAGRAPH (A) (ii) NOT TO APPLY.—Clause (ii) of
subparagraph (A) shall not apply to— "(i) any residential rental property or nonresidential real property, or "(ii) any property if, for the 1st full taxable year in which such property is placed in service— "(I) the amount allowable as a deduction under this section (as in effect before the date of the enactment of this paragraph) with respect to such property is greater than, "(II) the amount allowable as a deduction under this section (as in effect on or after such date and using the half-year convention) for such taxable year. '(g) ALTERNATIVE DEPRECIATION SYSTEM FOR CERTAIN PROPERTY.— "(1) IN GENERAL.—In the case of—
"(A) any tangible property which during the taxable year is used predominantly outside the United States, "(B) any tax-exempt use property, "(C) any tax-exempt bond financed property, "(D) any imported property covered by an Executive order under paragraph (6), and "(E) any property to which an election under paragraph (7) applies, the depreciation deduction provided by section 167(a) shall be determined under the alternative depreciation system. "(2) ALTERNATIVE DEPRECIATION SYSTEM.—For purposes of
paragraph (1), the alternative depreciation system is depreciation determined by using— "(A) the straight line method (without regard to salvage value), "(B) the applicable convention determined under subsection (d), and "(C) a recovery period determined under the following table: The recovery period shall be: The class life. 12 years.
"In the case of: (i) Property not described in clause (ii) or (iii) (ii) Personal property with no class life (iii) Nonresidential real and residential rental property » 40 years. "(3) SPECIAL RULES FOR DETERMINING CLASS LIFE.— "(A) TAX-EXEMPT USE PROPERTY SUBJECT TO LEASE.—In the
case of any tax-exempt use property subject to a lease, the recovery period used for purposes of paragraph (2) shall in no event be less than 125 percent of the lease term.