Illustrative Site Improvements
A hypothetical pad site used to split land, 15-year lot and fence, 5-year sign face, and 39-year building. Educational information, not tax advice.
Educational information, not tax advice.
Updated 2026-10-14
Assumptions
- Educational information, not tax advice.
- Assume a quick-service restaurant pad with building, lot, drive-through canopy, pylon, and landscaping. The building is 39-year nonresidential property.
- Land value is removed first. This page does not pick a land percentage.
- A drive-through canopy attached to the building is not automatically Rev. Rul. 2003-54 (pump canopies).
- Any dollar figures below are invented for arithmetic only. They are not a typical mix and not a client result.
Key takeaways
- Land stays in land. Site preparation and general grading are generally non-depreciable land.
- Lots and fences are usually 15-year land improvements (class 00.3). A garage is not a lot.
- A pylon structure can be 15-year and the sign cabinet 5-year, analogous to matrix splits and to Whiteco’s sign analysis — on the facts.
- Landscaping that would be destroyed if the lot were rebuilt can be 15-year; leftover lawn on extra acreage stays land.
A QSR pad includes building, lot, drive-through canopy, pylon, and landscaping. Land value is removed first. The lot, curbs, and perimeter fence are treated as 15-year land improvements, consistent with the retail matrix. Suppose, for arithmetic only, a $2.5 million project with $700,000 assigned to land. Invented depreciable basis is $1.8 million. No site-work percentage is claimed.
The pylon structure is analyzed as 15-year and the sign cabinet as 5-year, analogous to the casino matrix split and to Whiteco’s sign analysis. Landscaping that would be destroyed if the lot were rebuilt is 15-year in the dealership matrix; leftover lawn on extra acreage stays land.
Order of operations: land (including general grading), building, land improvements, personal-property site items (certain sign faces, removable bollards protecting equipment), inspection with photographs of attachment, reconciliation, CPA filing. Do not dump the entire civil pay-application line into 15-year property if it includes building pads or off-site dedicated improvements that stay with land.
Canopy
A drive-through canopy attached to the building is not automatically Rev. Rul. 2003-54 (pump canopies). That ruling treated gasoline pump canopies as 5-year property and their footings as 15-year. Attachment and function have to be described. A canopy that is structurally part of the restaurant box can stay with the building. A bolt-anchored canopy not attached to a building appears as 5-year in the retail matrix, with footings 15-year. Copy the row that matches the facts, and say which row.
Truck or loading canopies on other property types have the same problem. Do not import pump-canopy treatment by brand of fastener alone.
Land versus class 00.3
IRS Publication 946 and the ATG treat land as non-depreciable. Class 00.3 land improvements include sidewalks, roads, drainage, sewers other than municipal sewers, fences, landscaping, and shrubbery, and they exclude buildings and structural components by reference to Treas. Reg. §1.48-1(e). Parking lots, including striping, curbs, and landscape islands, are 15-year in examiner matrices. Parking structures are 39-year buildings. Penalties have been flagged in IRS material for treating a garage as 15-year paving.
Site preparation and general grading are generally land. Examiners are told to allocate land preparation among land, building, and depreciable land improvements; before-and-after photographs help. Off-site dedicated improvements can stay with land. This illustration does not decide every grading invoice.
Signs, fences, lighting, bollards
Whiteco Industries, Inc. v. Commissioner held that outdoor advertising signs were tangible personal property, not inherently permanent, and listed six factors. The IRS acquiesced in those criteria. A pylon’s steel structure that is designed to stay with the pad can still be a 15-year land improvement in casino and similar matrix rows, while the sign face or cabinet is 5-year. Analyze both pieces.
Perimeter fence is a usual 15-year item. Exterior lighting that highlights merchandise can be 5-year in the auto-dealership matrix; life-safety lighting on the building stays with the building. Bollards are classified by what they protect in that matrix: building (39-year), site or inventory (15-year), or movable equipment inside (5-year). The same product can land in three classes.
Landscaping
Landscaping that would not be replaced if the related depreciable asset were replaced is land. Landscaping destroyed with a related depreciable asset is 15-year in the dealership matrix. Extra acreage of lawn that is not part of the lot rebuild stays land. Irrigation that serves depreciable landscaping can follow it on the facts; a well serving extra acreage may not. Trentadue involved vineyard irrigation and is not a QSR holding; mention it only as a reminder that underground systems can be land improvements.
Do not treat every shrub as 15-year property because a matrix row exists.
Inspection, records, and filing
Measure the lot, photograph canopy attachment, pylon footings, fence, and whether landscaping sits in islands that would be destroyed with a rebuild. Civil pay applications and as-builts support quantities. Reconcile site classes plus the building to the invented $1.8 million, excluding land.
The CPA files Form 4562. Fifteen-year land improvements are generally bonus-eligible; the rate follows acquisition dates in Notice 2026-11. This page does not compute tax. Educational information, not tax advice.
Sources
- 1IRS Publication 5653 — Cost Segregation Audit Techniques Guide (rev. 2-2025)(opens in a new tab)
Written for IRS examiners. The guide states it is not an official pronouncement of law and cannot be cited as authority. It predates the July 2025 law.
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- 4IRS Publication 946 — How To Depreciate Property (2025)(opens in a new tab)
Appendix B reproduces the Rev. Proc. 87-56 class lives.
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