It makes sense to define real property for tax purposes when discussing real estate tax.
Under 1.856-10, real property is actually defined as land and improvements to land. Local law is not controlling. Although this is for Subchapter M, this is relatively consistent with the regs of 48, which states that real property is property consisting of land and improvements to land, such as 1) buildings, 2) inherently permanent structures, and 3) structural components.
A “building” generally is any structure or edifice enclosing a space within its walls, usually covered by a roof to provide shelter or housing, parking, offices, displays, or sales space. This is relatively consistent from 856 and 1031 and 48.
Inherently permanent structures are any distinct assets and permanently affixed to real property and expected to remain indefinitely based on facts and circumstances. 1031 and 1.856-10.
Structural components are constituent parts of inherently permanent structures. Determination is based on various factors such as whether it is designed to move, damage from removal, and timing of installation. Examples include wiring, HVAC, sprinkler and alarm systems, and escalators. 48, 1031, and 263.
Structural components are specifically enumerated as eight building systems, which together with the building, comprise a single unit of property. However, capitalization rules apply to each component and the building separately.
The eight building systems are:
- HVAC
- Plumbing systems
- Electrical systems
- Escalators
- Elevators
- Fire-protection and alarm systems
- Gas systems, and
- Other structural components as designated