128 T.C. No. 8



                     UNITED STATES TAX COURT



            LEO AND EVELYN TRENTADUE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3510-04.               Filed April 3, 2007.



          Ps depreciated trellising, drip irrigation
     systems, and a well as farm machinery or equipment, in
     connection with their farming activity of growing wine
     grapes. R determined that such property would have a
     longer class life and be depreciable as permanent
     improvements to land.

          Held: The trellising was properly classified as
     farm machinery or equipment, and the irrigation systems
     and well should be classified as land improvements.



     Philip J. Terry, for petitioners.

     Cathy A. Goodson, H. Clifton Bonney, Jr., and Andrew R.

Moore, for respondent.
                               - 2 -

                              OPINION

     GERBER, Judge:   Respondent determined income tax

deficiencies for petitioners’ 1999 and 2000 tax years in the

amounts of $12,339 and $5,473, respectively.    The deficiencies

are solely attributable to respondent’s adjustments to items

connected with petitioners’ farming activity, which involved the

growing of grapes for the production of wine.    The issues

remaining for our consideration involve the class life and

depreciation recovery periods for three different assets used by

petitioners in their farming activity.   In particular we consider

whether petitioners’ wine grape trellises, irrigation systems,

and/or well should be depreciated as land improvements, as

determined by respondent (20-year class life) or as agricultural

equipment, as claimed by petitioners (10-year class life).


                            Background

     Petitioners are husband and wife and resided in Geyserville,

California, at the time their petition was filed in this case.

Petitioners have operated, as a sole proprietorship, the

Trentadue Winery and Vineyards (farm property) primarily in the

immediate vicinity of their personal residence.    In addition to

petitioners’ residence, the farm property includes a winery, a

vineyard, an event center, and a well.   During 1999 and 2000, the

vineyard consisted of approximately 85 acres planted with

grapevines.   Petitioners sell approximately 75 percent of their
                               - 3 -

grape production to their own winery, and the remaining 25

percent is sold to unrelated wineries.

     Vines of a particular variety are grown in a “block”, which

is not a standard size area of land.   Depending upon the size of

the block, petitioners typically used 10 or more individuals to

install vines on a block.   After the soil has been ripped or

broken and nutrients added, the trellis rows are laid out with a

mark to identify the location of each vine.   A 2-foot trench is

dug and a PVC pipe is installed, along with risers at each

trellis row for the irrigation system.   End and in-line posts are

then pounded 2 to 3 feet into the ground, and anchors are screwed

into the ground to secure the end posts with guy wires.   Various

wires are then attached and strung between the posts to train and

irrigate the vines.   Next, a drip hose is attached to the riser

and fastened to the drip wire with clips.   Finally emitters are

placed on the drip hose at the eventual site of each vine.

     As of the time of trial, petitioners were cultivating 12

different grape varietals, including Carignane, Chardonnay,

Zinfandel, Petite Syrah, Merlot, Sangiovese, Montepulciano,

Petite Verdot, Malbec, Syrah, Cab Franc, and Cabernet.

Petitioners used two grape-growing methods--trellising and head

pruning.   The trellising method involves the use of trellises and

a drip irrigation system, whereas the head pruning method does

not require a trellis, but drip irrigation may be used.
                               - 4 -

Petitioners use the head pruning method for their Carignane,

Zinfandel, and Petite Syrah grapevines and trellising for the

others.

     During 1999 and 2000, petitioners’ son, Victor Trentadue

(Victor), managed petitioners’ vineyard operations, including the

growing of grapes, and he also managed Trentadue Winery,

petitioners’ separate business for making wine.   Victor also

owned his own business called Four Seasons Vineyard Management

Co., which installed, maintained, and removed grapevines,

trellises and irrigation systems.

     Petitioners attached to their 1999 and 2000 Joint Federal

Income Tax Returns, a Schedule F, Profit or Loss From Farming, on

which they claimed depreciation deductions for, among other

items, the trellis components, trellis systems, irrigation

systems, and the well.   With respect to the above-listed

property, depreciation deductions were calculated using a 10-year

class life, which includes 7- to 10-year recovery periods.

     In the notice of deficiency, respondent determined that the

recovery period for each of these properties was 15 years, which

would place them in the 20-year class life, which includes 15- to

20-years class lives.

Trellising

     Trellising is a method of training vines used in the

production of wine grapes.   The primary components of a trellis
                                - 5 -

are posts, stakes, and wires.   A trellising system is set up in

rows with various types of wires strung between posts.    Stakes,

anchors, staples, gripples and other types of devices are used to

stabilize the posts, attach the wires to the posts and to attach

various things to the wires in order to train and maintain the

grapevines.   During the grape-growing season, wires may be moved

or adjusted, and new wires may be added to the existing

trellises.

     Most trellis systems use the same components and vary in

configuration depending upon the topography, soil conditions,

farming methods (such as mechanical or hand harvesting of grapes)

and other factors.   Petitioners use two types of trellising--

vertical shoot positioning (VSP) and “T-trellis” design systems.

All of the vine trunks are grown to the same height with a VSP

trellis system, and the vines grow vertically on the wire.

Petitioners’ approach is not to permit the vines to engulf or

grow over the wire so that the wires can be moved and/or replaced

in the training of the vines.   A variation on the standard VSP is

the “Scott Henry” design where the vines are grown vertically at

two, instead of one, levels.    A T-trellis configuration consists

of a series of T-shaped posts placed in a line where the wires

are attached to the crossarms of the T-posts.   The local

California county’s (Sonoma) taxing authority treats the
                               - 6 -

trellises as property used in vineyard development and not as

land improvement.

     Although it may not occur often, trellis systems have been

dismantled and components reused in a new location.    Trellising

components become damaged, rust and/or wear out and are repaired

and/or replaced throughout the year.   The trellising posts,

stakes, wires, etc. are regularly adjusted, tightened, and

replaced to accommodate the training of the vines for maximum

grape-growing performance.   Occasionally, trellising may be

removed from a few rows of a block or from an entire block of

vines, and the major components are reused.    Grapevines may be

removed from a trellis system without damaging the trellis.

Likewise, a trellis system may be removed without damaging the

grapevines.   It is also possible to remove the vines and reuse

the trellising components for the new vines.    Vines may be

replaced when they become diseased or if a particular varietal

becomes unprofitable or unpopular.

     The primary structural components that affix the trellis to

the earth are the end and in-line posts which are rammed 2 to 3

feet into the ground and stabilized and secured by metal stakes

and/or mechanically screwed-in anchors.   The end posts may be

metal or wood, the wooden posts are 8 to 10 feet in length, and

the wood posts may be pressure treated with chemicals to retard
                               - 7 -

decay.   Metal end posts are approximately 9 feet long and usually

4 inches in diameter.

     The posts used between the end posts (in-line posts) are

typically 9 feet in length and approximately 4 to 5 inches in

diameter if wooden and 3½ inches in diameter if metal.   The

wooden posts may be pressure treated with chemicals to retard

decay.   The purpose of the in-line posts is to support the wires

used to train the vines and support the drip irrigation lines.

The posts support 10- to 14-gauge wires, which in turn support

drip irrigation lines, vine cordons and fruit, and foliage.    All

wires are attached, by staples and gripples, to the end posts and

the in-line posts.   The staples attach the wire to the posts, and

the gripples provide the ability to adjust the tension of the

wire.

     In addition to in-line posts, wood or metal training stakes

are pounded 1½ to 2 feet into the ground to support each vine.

The stakes may be wood or metal and are typically 6 feet long,

and the wooden ones may be pressure treated.

     Concrete or cement is not used to affix the posts to the

earth.   Petitioners did not intend for their trellising to be

permanently affixed to the earth.

     One goal in the use of trellis systems is to improve the

intensity and quality of grapes, which, in turn, improves the

intensity, quality, and value of the resulting wine.   The manner
                                - 8 -

in which the grape quality and intensity is improved is to manage

the canopy and foliage in an attempt to control sunlight,

temperature, and moisture to the vines.   Trellising is also used

to assist in producing the ideal number of vine shoots and

delivering nutrition to the vine.   Some wine grape varietals,

such as Zinfandel and Petit Syrah, are grown without the use of

trellises.   About one-half of petitioners’ vines are not

trellised.

     When vines in a particular block are being removed and

replaced with new vines, the posts and stakes of the trellising

are removed for reuse.    Petitioners have removed stakes and posts

and stored them for reuse.   Good-quality wire is removed and

coiled for reuse, and worn or rusted wire or parts are gathered

up with the removed vines, the vines are burned, and the

remaining wire is sent to recycling and normally not reused.

Although time intensive, it is possible to remove and reuse the

wire in the trellising.   For an 8- or 9-acre block it takes

approximately a week for a crew (of approximately 4 to 10 people

and machines) to dismantle the trellising, irrigation system,

remove the vines, and prepare the soil for the next planting.

The time could be shorter or longer depending on the size of the

crew.   In one instance it took about a week to dismantle an 8- or

9-acre block, the vines and unusable parts were piled, and the
                                - 9 -

vines were burned about 30 days later, leaving a pile of wire and

metal parts that were taken for recycling.

Drip Irrigation

     Drip irrigation systems are used to deliver water and other

nutrients to grapevines.    A drip irrigation system is usually

designed for a particular block of vines.    Petitioners use drip

irrigation systems in connection with trellised vines.

Petitioners’ systems are composed of PVC pipes, plastic tubing,

emitters, risers, and other assorted hardware.    The larger supply

pipes are 4 to 6 inches in diameter, and there is a series of

successively smaller pipes or tubes that ultimately end in drip

emitters that deliver water and nutrients to each vine.    A

substantial portion of the pipes and tubes is buried

approximately 2 feet underground and come out of the ground at

certain intervals where they are attached to drip lines affixed

to wires of the trellis system.    The main lines that come to each

field or block can be marked and saved if the vines are removed

and the ground ripped.   The remainder of the piping that delivers

water and nutrients to the vines is rendered unusable if the

ground is “ripped”.   Components of drip irrigation systems are

subject to damage and wear, and portions of a system are repaired

and/or replaced annually.

     There was no incidence of the removal of a drip irrigation

system separate from the removal of the vines.    When the vines
                               - 10 -

are removed, however, the soil of a vineyard is ripped and the

drip irrigation system, with the exception of some of the drip

hoses and sprinklers, is destroyed, rendering the components

unusable.    “Ripping” is a process by which the hardpan (crusted

surface of the ground) is opened and broken by means of dragging

a large knifelike device through the ground.    Normally, ripping

takes place when vines are being removed for the planting of new

vines.    Drip irrigation systems are not designed or constructed

to be permanent and may be removed from the ground.    The removal,

however, results in all piping, with the exception of the main

lines that carry the water supply to the block, manifolds,

valves, and possibly some drip tubing, being rendered unusable.

         The local California county’s (Sonoma) taxing authority

treats the drip irrigation systems as property used in vineyard

development and not as land improvement.

The Well

     Water used by petitioners for all uses on their farm

property is supplied by a well.    In May 1998, petitioners began

the process of replacing their old well with a new one.    A well

permit was approved November 25, 1998, and construction of a new

well began on January 18 and was completed on February 5, 1999.

The boring of the new well was 17 inches in diameter and drilled

to a depth of 156 feet.    A 12-inch PVC casing was inserted in the

well and set by means of fine sand poured into the boring around
                              - 11 -

the casing to a height approaching 50 feet from the surface of

the ground.   The final 50 feet of the well boring was filled with

concrete around the 12-inch PVC casing in order to seal the well,

and a pump was inserted into the casing.     Other than the pump,

which can be removed and replaced, the well has no moving parts.

     The average life of this type of well is approximately 30

years, but can be longer or shorter depending on the water

quality and the existence of minerals in the vicinity that can

plug the casing.   A well can be maintained and cleaned to stem or

remove the buildup of mineral deposits in the well casing.     The

cost of such procedures ranges from $800 to $1,500.     The cost of

petitioners’ new well was $11,426.     Petitioners’ old well was

destroyed on April 14, 1999, at a cost of $900.     The destruction

of the old well is accomplished by perforating the casing,

filling it with a waterproof clay, and capping it.

In General

     For Federal tax purposes, petitioners classified and

consistently treated the trellis components, drip irrigation

systems, and wells as equipment depreciable over 7 to 10 years

for 1999 and 2000 and for all years before and after.

Petitioners’ certified public accountant, who specializes in wine

industry accounting and taxation, advised petitioners that he

believed their method for depreciation of the trellising and drip

irrigation systems to be correct.    As grape growers and wine
                              - 12 -

makers, it is petitioners’ understanding that the industry has

treated trellising and drip irrigation systems as equipment

depreciable over 7 to 10 years.   In Sonoma County, California,

grapevines become subject to property tax 4 years after planting,

whereas trellises, stakes, and irrigation systems are subject to

such tax beginning in the year of installation.

                            Discussion

     The parties disagree about whether trellising, irrigation

systems, or a well are to be classified as machinery or land

improvements for purposes of depreciation.    A depreciation

deduction is allowed for the exhaustion, wear and tear, and

obsolescence of property used in a trade or business.     Sec.

167(a).1   To some extent, the recovery period determines the

amount of the depreciation deduction.    Sec. 168.   The recovery

period is based on the “class life” of the property.     Sec.

168(c), (e).   There is no question in this case about whether the

subject assets are depreciable.

     For purposes of this case, “class life” is the asset

guideline class in which such property is classified under Rev.

Proc. 83-35, 1983-1 C.B. 745, and restated in Rev. Proc. 87-56 to




     1
       Unless otherwise specified, section references are to the
Internal Revenue Code as amended and in effect for the years
under consideration. Rule references are to this Court’s Rules
of Practice and Procedure.
                              - 13 -

incorporate the class lives that had been set under section 168.

See Rev. Proc. 87-56, 1987-2 C.B. 674.

     Under Rev. Proc. 87-56, 1987-2 C.B. at 677, asset class 00.3,

     Land Improvements:

     Includes improvements directly to or added to land,
     whether such improvements are section 1245 property or
     section 1250 property, provided such improvements are
     depreciable. Examples of such assets might include
     sidewalks, roads, canals, waterways, drainage
     facilities, sewers * * * , wharves and docks, bridges,
     fences, landscaping, shrubbery, or radio and television
     transmitting towers. * * *

Under Rev. Proc. 87-56, Asset Class 01.1--Agriculture:

     Includes machinery and equipment, grain bins, and fences
     but no other land improvements, that are used in the
     production of crops or plants, vines, and trees; * * * .

The definitions provided in Rev. Proc. 87-56, supra, do not

specifically denominate or classify trellises, drip irrigation

systems, or wells, and, accordingly, we must decide the category

or class life in which these assets most properly fit.   Generally,

the class life categories cover two broad groupings--permanent

improvements to real property, and machinery and equipment that is

not a real property improvement.

The “Whiteco” Factors

     The question of whether property is a permanent improvement

to land has long been a subject of tax controversy.   There are

innumerable depreciation and investment tax credit cases where

this very question has been addressed.   The parties here sought

guidance from one such case where this Court decided whether a
                                   - 14 -

particular asset was a land improvement (i.e., permanent).

Whiteco Indus., Inc. v. Commissioner, 

 (1975).       In

Whiteco Indus., Inc., the Court analyzed existing caselaw and

derived six factors that had been used in other cases to determine

whether an asset is an improvement to real property.       Id. at 672-

673.       The Court in Whiteco decided whether advertising signs

(outdoor billboards) constitute "tangible personal property"

within the meaning of section 48(a)(1)(A), and therefore, may

qualify for the investment credit provided in section 38.2      The

statute, definitions, and concepts in Whiteco are sufficiently

similar to the ones we consider so that we find it appropriate to

use those guidelines to assist the Court in this case.       Although

there are six tests, they overlap each other, but their primary

focus is the question of the permanence of depreciable property

and the damage caused to it or to realty upon removal of the

depreciable property.       No one factor has been considered to be

determinative, and the guidelines have been used merely as an aid

to deciding whether a particular property is or is not a permanent

improvement to real property.




       2
       Whiteco Indus., Inc. v. Commissioner, 

 (1975)
involved the taxable years 1967 through 1971 and, accordingly,
was construing secs. 38 and 48(a)(1)(A), as in effect for those
years.
                                - 15 -

     1.    The first factor concerns whether “the property [is]

capable of being moved, and has it in fact been moved?”    Whiteco

Indus. Inc. v. Commissioner, supra at 672.

     (a) The trellis components comprise posts, stakes, and wires.

The posts, which vary in size, are pounded approximately 2 feet

into the ground and are secured or stabilized by means of wire and

anchors.    After the posts are in place, wire is strung between

them, and stakes, clips and other attachment devices are used to

attach drip lines and to train the grapevines.    The record in this

case reflects that trellising components could be moved; i.e., the

wires, anchors, and post can be dismantled and reused.    Respondent

made the point, however, that it was not financially practical to

move trellis components.    Although respondent may be correct about

the financial efficacy and practicality, nevertheless the concept

being considered has more to do with the concepts of portability

versus permanence.    There was credible testimony on behalf of

petitioners that trellising had been moved and reused, and

petitioners’ practice was to store used posts and other trellising

components for future use.    Accordingly, as to the trellising,

this factor favors petitioners.

     (b) The drip irrigation system comprises pipe, tubing and

emitters, risers, and other assorted hardware.    A substantial

portion of the pipe is located under the ground.    The portion

above the ground (other than the main lines and valves) brings
                               - 16 -

water and nutrients to each vine through tubing and drip emitters

attached to the horizontal wires.    Most of the drip irrigation

systems may not be easily removed from the ground and generally

become unusable when they are removed.    For example, if new vines

were to be planted, the ground would first be broken by ripping

with a large blade that, incidentally, tears up the system of

irrigation pipes and tubes from under the ground.    Although it is

possible to salvage some of the above-ground tubing, it is not

always reusable.   The ripping process, however, damages the pipes

and tubes so as to render them unusable.    There was no evidence in

the record showing that a buried drip irrigation system had been

removed and reused.   Therefore, the drip irrigation system cannot

be readily removed from the earth.    This factor, as it relates to

the drip irrigation system favors respondent.

     (c) The well boring and casing are obviously not capable of

being moved, and there is no evidence in the record that it could

be moved or removed from the ground.    We note that petitioners’

old well was left in the ground and disabled, rather than being

removed from the ground.   This factor favors respondent.

     2.   The second factor is whether “the property [is] designed

or constructed to remain permanently in place?”     Id.

     (a) The trellises are intended to be sufficiently secured to

support the wires, vines, tubing, etc., but they are not designed

to remain permanently in place.   For example, the posts are not
                                 - 17 -

set in concrete.   In addition, various components of the

trellising are changed or modified to accommodate the growth or

the feeding of the vines.   This factor favors petitioners.

     (b) Conversely, with the exception of risers, plastic tubing,

and drip emitters, the drip irrigation system is placed 2 feet

underground in rows or lines that follow the rows of vines.    The

evidence in the record indicates that, with the exception of

manifolds, valves, and main lines going to each block, removal of

the pipes and tubes is not easily accomplished, and so, for all

practical purposes, they are permanently embedded in the ground.

This factor favors respondent.

     (c) Obviously, petitioners’ well was designed and intended to

remain permanently in the ground.    This factor favors respondent.

     3.   The third factor concerns whether there “Are * * *

circumstances which tend to show the expected or intended length

of affixation; i.e., are there circumstances which show that the

property may or will have to be moved?”    Whiteco Indus., Inc. v.

Commissioner, supra at 672.

     (a) The trellising and drip irrigation systems are built

and/or installed with the intent that they service the grapevines

during their useful life.   The evidence shows that grapevines are

expected to last approximately 25 years, but various factors can

affect the usefulness of a vine.    A vine may become diseased,
                                 - 18 -

requiring its removal.    A particular variety of wine/grape may

decline in demand and become economically obsolescent.

     If those events occur, the removal of old vines and the

planting of new vines normally necessitate the removal of the

trellising and drip irrigation systems.    As a general matter,

however, it is intended that trellising and drip irrigation

systems remain in place for the life of the grapevines for which

they are constructed.    This factor tends to favor respondent with

respect to the trellising and drip irrigation systems.

     (b) The well is intended to remain in place indefinitely;

however, wells have a limited usefulness due to minerals and other

things in the water that can obstruct the well casing and pump

equipment.   Generally, a well is expected to last more than 20

years.    Accordingly, this factor favors respondent with respect to

the well.

     4.   The fourth factor is “How substantial a job is removal of

the property and how time-consuming is it?    Is it ‘readily

removable’?”     Id., at 673.3


     3
       The relevance of the “movability” of an asset was
discussed in Hosp. Corp. of Am. & Subs. v. Commissioner, 

, 57-58 (1997). We found the following discussion from that
case to be instructive:

        Movability itself is not the controlling factor in
     deciding whether the property lacks permanence.
     Kramertown Co. v. Commissioner, 

, 731 (5th
     Cir. 1974), affg. T.C. Memo. 1972-239; see also
     Consolidated Freightways v. Commissioner, 708 F.2d
                                                     (continued...)
                               - 19 -

     (a) The installation of trellising is labor intensive, and,

likewise, the removal of the trellising would be labor intensive

if the components were being salvaged for future use.   Clearly,

the poles and likely the stakes could be easily salvaged for

reuse.   The wire and related materials and hardware, however,

would be more difficult and time consuming to salvage for reuse.

If one merely wished to remove the wire, posts, and related

materials, but not for reuse, it could be accomplished quickly

with large equipment.   In these situations, the wood, wire, vines,

etc. are piled in the field and burned with the metal parts

(including the wire) remaining after the fire.   The resulting

salvaged materials would not be suitable for reuse.



     3
      (...continued)
     1385, 1390 (9th Cir. 1983) (a variety of factors is
     considered, including, where possible, the function and
     design of the component in issue, the intent of the
     taxpayer in installing the component, and the effect of
     removal of the component on the building), affg. in
     part and revg. in part 

 (1980); Everhart v.
     Commissioner, 

, 331 (1973) (moveability per
     se does not determine whether or not property is
     personal property); Dixie Manor, Inc. v. United States,
     44 AFTR 2d 79-5442, 79-2 USTC par. 9469 (W.D. Ky. 1979)
     (fact that walls often are removed because of a change
     in design by itself is not sufficient), affd. without
     published opinion 

 (6th Cir. 1981). The fact
     that an item is not readily reusable in another
     location is evidence supporting the conclusion that it
     is to be treated as permanent in its present location.
     Mallinckrodt, Inc. v. Commissioner, 

, 403
     (8th Cir. 1985), affg. per curiam T.C. Memo. 1984-532.

Id. at 57-58.
                                 - 20 -

Accordingly, with respect to the trellising, this factor works

both ways and is neutral, not favoring petitioners or respondent.

     (b) Installation of a drip irrigation system is likewise

labor intensive, and, its removal would be time consuming if the

components were being salvaged for future use.      Similarly, if the

drip irrigation system were removed by means of the ripping

process, the removal would be quick and inexpensive, but the pipe,

tubing, and related hardware would, to a great extent, be rendered

unusable in the removal process.     Therefore, with respect to the

drip irrigation system, this factor works both ways and is

neutral, not favoring petitioners or respondent.

     (c) The well would obviously not be readily removed from the

earth, and, accordingly, this factor favors respondent as to the

well.     Evidence in this case reflected that when a well has served

its usefulness, its tangible components are disabled in place,

rather than removed from the ground.

     5.    The fifth factor concerns “How much damage will the

property sustain upon its removal?”       Whiteco Indus., Inc. v.

Commissioner, supra at 673.

        (a) As it relates to the trellising and drip irrigation

systems in this case, the fifth factor is the converse of the

fourth factor.     If those components/systems were carefully

removed, the time consumption or cost would be great, and the

damage would be small.     Conversely, if the components/systems are
                               - 21 -

quickly removed, the damage to the property would be great.

Accordingly, this factor works both ways and is neutral, not

favoring petitioners or respondent.

     (b) The well is permanently affixed to the realty, and,

accordingly, this factor favors respondent.   We note that the old

well was disabled by perforation and filling rather than removal

from the ground.

     6.   The sixth factor addresses “the manner of affixation of

the property to the land?”   Id.   In Whiteco the Court noted that

“The poles on which the * * * [taxpayer’s] signs are mounted are

placed in the ground and surrounded by concrete; yet, such poles

can easily be removed from the ground, and as a matter of

practice, they are so removed.”    Id.

     (a) Petitioners’ trellising, similar to the advertising

signs in Whiteco Indus., Inc. v. Commissioner, 

(1975), were placed in the ground to a depth of 2 to 3 feet.

Unlike the posts in Whiteco, petitioners’ trellising posts were

not set in concrete, making them even less difficult to remove

from the ground than the posts in Whiteco.    The posts are

stabilized with wires and anchors which screw into the ground and

may be unscrewed.   Accordingly, the trellising component system

may easily be removed from the ground, favoring petitioners with

respect to this factor.
                                - 22 -

     (b) Although the drip irrigation system is not permanently

affixed in the ground, it is, for the most part, buried in

trenches or cuts in the ground.    Accordingly, the drip irrigation

systems may not be easily removed from the ground, favoring

respondent with respect to this factor.

     (c) The well, which is bored deeply into the ground and set

in concrete for almost one-third of its 156-foot length, would be

most difficult to remove from the ground, and, accordingly, this

factor favors respondent.

Final Analysis

     In the context of petitioners’ grape-growing and winery

operation there are assets which clearly fit into the category of

permanent improvements.4    One such example would be the winery

building that is permanently affixed to the real property.    It is

clear to this Court that petitioners’ well fits within that

category and is no different from other permanent improvements to

the real property and should be included in the 20-year class

life for purposes of depreciation.       The six Whiteco




     4
       The parties made some arguments about the local taxing
authorities’ classification of the assets we consider. Such
classifications, however, are not controlling in matters of
Federal taxation, and we have been guided by the Federal statutes
and case precedent. In addition, petitioners attempted to show
that respondent had not previously questioned petitioners’
depreciation practices; however, there is ample precedent to the
effect that each tax year is considered separately, and the
Commissioner’s failure to question or his informal approval of a
practice in a prior year does not amount to an estoppel.
                               - 23 -

Indus., Inc. v. Commissioner, supra, factors serve to verify and

support this result.

     At the other end of the spectrum of assets used in

petitioners’ grape-growing operation, a tractor would be an

example of machinery and equipment that is not a permanent

improvement to land so as to classify it within the 10-year class

life for purposes of depreciation.      The trellising and drip

irrigation systems fall somewhere between permanent buildings and

farm machinery, such as tractors, and in some ways are intended

to have permanence and in other ways do not.      The component parts

of trellising and drip irrigation systems are personal property

before they are configured and placed in or on the ground.        By

themselves, the posts, stakes, wire, pipe, and tubing are all

personal property and could not be considered a “permanent land

improvement”.   It is the manner in which they are combined and/or

affixed in the ground that changes their classification from

personal to “real property”.

     There is no bright-line test by which such assets could be

readily classified as always being permanent land improvements or

farm machinery or equipment.   For example, an above-ground

irrigation system would more likely be classified as machinery or

equipment, whereas one buried in the ground would more likely be

classified as a permanent land improvement.      In each instance of

an asset that is not clearly in one category or another, we must
                              - 24 -

consider these factors on an ad hoc basis.

     With respect to the trellising components, they are quite

similar to fencing with the major difference being that one is

intended to keep things in or out and the other to support grape-

growing equipment or train grapevines.   Both have posts that are

set in the ground and some form of wire as components.    Clearly,

a trellis may have more components and/or be more complex than a

fence, but both are similarly constructed and maintained.

     In that regard, Rev. Proc. 87-56, supra, to the extent

pertinent here, categorizes the 10-year class life as one

including machinery and equipment, grain bins, and fences but no

other land improvements, that are used in the production of

vines.   In that regard, petitioners contend that trellising is

farming equipment and not a land improvement.    Conversely,

respondent contends the trellising is an improvement to land.

Adding to the complexity of categorizing the trellising in one

class life category or the other is case precedent holding that

posts anchored in concrete were not considered permanent

improvements to realty.   Whiteco Indus., Inc. v. Commissioner,

supra.   In this case, the trellising posts are the component by

which the trellis is attached to the ground.    We note that

petitioners did not use concrete to fix the posts in place.

Therefore, petitioners’ position in this case is stronger than

the taxpayer’s position in Whiteco.
                              - 25 -

     Respondent’s best argument is the fact that the trellising

is intended to last as long as the grapevines, which have an

expected life of approximately 25 years.    Respondent also makes

the point that it may not be economically practicable to remove

the trellising.   Petitioners’ best arguments are that

irrespective of the economics, they have dismantled, moved,

stored, and/or reused trellising, and it is not permanently

affixed to the ground.

     Respondent also attempts to convince us that a trellis is

“not machinery in the ordinary sense of the word.”   Perhaps

respondent expects us to see generically a complex machine, such

as a tractor with an internal combustion engine, when we think of

the concept of a “machine”.   A “machine”, however, may be a

simple lever.   The posts and stakes used by petitioners, in

combination with the wires, constitute a machine that is

adjusted, modified, and changed in order to train grapevines to

produce high-quality grapes for the production of wine.    We

therefore reject respondent’s argument that a trellis is not a

machine within the meaning of the statutes and revenue procedures

we consider.

     As to the Whiteco Indus., Inc. v. Commissioner, supra,

factors as applied to trellising, three favored petitioners, one

favored respondent, and two were neutral.   In that regard, we

consider the Whiteco factors and the assets classifications to
                             - 26 -

mainly distinguish between those things that are permanently

affixed to the real estate and those that are not.    From that

perspective, we hold that trellising is not a permanent

improvement to the real property, and, accordingly, petitioners

properly classified it in the 10-year class.

     The drip irrigation systems, unlike the trellising, are, to

a great extent, buried in the ground.    Parts of it may be

repaired and maintained like the trellises, but a substantial

portion of it is under the ground and will remain there until the

vines die or are removed for some other reason.    This Court has

already decided that grapevines are not “tangible personal

property” for purposes of section 179.    See Kimmelman v.

Commissioner, 

, 308 (1979), where the Court held that

“the grapevines are an ‘inherently permanent structure’ within

the meaning of section 1.179-3(b), Income Tax Regs., and

therefore, the grapevines are not tangible personal property.”5

In reaching the holding in Kimmelman, the Court noted that “Most

of the vines involved * * * were planted at or around the turn of

the century, and none of these vines has been moved since then”.

Kimmelman v. Commissioner, supra at 308.    To a great extent, the

underground piping is inextricably connected with the life of the

vines.


     5
       We note that trellising was shown to have been adjusted,
moved, or reused without moving or uprooting the vines, whereas
there was no such showing with respect to irrigation systems.
                                - 27 -

     By way of analogy, this Court in deciding the question of

whether sprinkler heads were an “inherently permanent structure”,

found that the sprinkler heads, although easily removable, were

inseparably attached to an underground water system.   Metro Natl.

Corp. v. Commissioner, T.C. Memo. 1987-38.   The Court in Metro

Natl. Corp. held that the underground water system and sprinkler

heads were an “inherently permanent structure” and not tangible

personal property within the meaning of section 48(a)(1)(A).

     With respect to the irrigation systems, four of the six

factors favored respondent’s position, and two were neutral with

respect to the drip irrigation system.   Again, the question of

permanent attachment to the real property is the primary focus of

the factors and asset depreciation classes, and the drip

irrigation systems is more akin to a permanent improvement.    The

placement of a substantial portion of the pipe or tubing in the

ground and the difficulty of removing the system are the primary

factors that render the irrigation systems we consider here to be

permanent land improvements.6   See, e.g., Mallinckrodt, Inc. v.

Commissioner, 

, 403 (8th Cir. 1985), affg. T.C. Memo.



     6
       We note that some portions of petitioners’ irrigation
systems were above the ground and regularly repaired and/or
replaced. Items such as tubing, emmiters and the like may have
been considered severable from the irrigation systems and not as
land improvements if they had been separately claimed and/or
accounted for. We were, however, presented with the sole choice
of deciding whether the irrigation system, as a whole, was
machinery or a permanent land improvement.
                               - 28 -

1984-532, where the court declared:     “The fact that an item is

not readily reusable in another location certainly is evidence

supporting the conclusion that it is to be treated as permanent

in its present location.”    Accordingly, we hold that the well and

drip irrigation systems are permanent improvements to the real

property.

       Petitioners, as an alternative, argue that if the trellises

or irrigation systems are land improvements, they come within the

exception of section of Rev. Proc. 87-56, sec. 5.05, 1987-2 C.B.

at 676.    Because we have decided that petitioners’ irrigation

systems are, in the context of this case, land improvements, we

consider petitioners’ argument.

       To the extent pertinent, section 5.05 of Rev. Proc. 87-56,

1987-2 C.B. at 676, contains the following special rules

incorporated from Rev. Proc. 83-35, sec. 2.02, 1983-1 C.B. at

745:

       "Land Improvements," includes "other tangible property"
       that qualifies under section 1.48-1(d) of the Income
       Tax Regulations. However, a structure that is
       essentially an item of machinery or equipment or a
       structure that houses property used as an integral part
       of an activity specified in section 48(a)(1)(B)(i) of
       the Code, if the use of the structure is so closely
       related to the use of the property that the structure
       clearly can be expected to be replaced when the
       property it initially houses is replaced, is included
       in the asset guideline class appropriate to the
       equipment to which it is related.
                              - 29 -

     Respondent argues that in order for Rev. Proc. 87-56, sec.

5.05, to apply, the “irrigation system must be a structure that

is essentially an item of machinery and equipment, and there is

equipment to which the structure is related from which we can

determine the appropriate asset guideline class.”    We agree with

respondent.   Because this Court has already decided that

grapevines are permanent improvements to land and/or not tangible

personal property, petitioners’ alternative argument must fail.

     Accordingly, we hold that respondent’s adjustments are

sustained with respect to the irrigation systems and the well.

Conversely, we hold that the trellising is not a permanent land

improvement and that respondent’s determination with respect to

the trellising is in error.

     To reflect the foregoing,

                                      Decision will be entered

                                 under Rule 155.