Treasury Regulations · 26 CFR

§ 1.167(a)-4. Leased property.

In effect eCFR current as of October 15, 2026

Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).

Regulation under 26 U.S.C. § 167(a)

Cite as 26 CFR § 1.167(a)-4

At a glance

Read from the text and its source citation. Not part of the regulation.

Status: In the current eCFR
Issued: September 19, 2013 by T.D. 9636
Issued under: 26 U.S.C. § 167(a)
Length: 454 words · about 2 min to read
Cross-references: cites 4 Code sections and 1 regulation; cited by 3

¶(a) In general. Capital expenditures made by either a lessee or lessor for the erection of a building or for other permanent improvements on leased property are recovered by the lessee or lessor under the provisions of the Internal Revenue Code (Code) applicable to the cost recovery of the building or improvements, if subject to depreciation or amortization, without regard to the period of the lease. For example, if the building or improvement is property to which section 168 applies, the lessee or lessor determines the depreciation deduction for the building or improvement under section 168. See section 168(i)(8)(A). If the improvement is property to which section 167 or section 197 applies, the lessee or lessor determines the depreciation or amortization deduction for the improvement under section 167 or section 197, as applicable.

¶(b) Effective/applicability date—

¶(1) In general. Except as provided in paragraph (b)(2) or (b)(3) of this section, this section applies to taxable years beginning on or after January 1, 2014.

¶(2) Application of this section to leasehold improvements placed in service after December 31, 1986, in taxable years beginning before January 1, 2014. For leasehold improvements placed in service after December 31, 1986, in taxable years beginning before January 1, 2014, a taxpayer may—

¶(i) Apply the provisions of this section; or

¶(ii) Depreciate any leasehold improvement to which section 168 applies under the provisions of section 168 and depreciate or amortize any leasehold improvement to which section 168 does not apply under the provisions of the Code that are applicable to the cost recovery of that leasehold improvement, without regard to the period of the lease.

¶(3) Application of this section to leasehold improvements placed in service before January 1, 1987. Section 1.167(a)-4 as contained in 26 CFR part 1 edition revised as of April 1, 2011, applies to leasehold improvements placed in service before January 1, 1987.

¶(4) Change in method of accounting. Except as provided in § 1.446-1(e)(2)(ii)(d)(3)(i), a change to comply with this section for depreciable assets placed in service in a taxable year ending on or after December 30, 2003, is a change in method of accounting to which the provisions of section 446(e) and the regulations under section 446(e) apply. Except as provided in § 1.446-1(e)(2)(ii)(d)(3)(i), a taxpayer also may treat a change to comply with this section for depreciable assets placed in service in a taxable year ending before December 30, 2003, as a change in method of accounting to which the provisions of section 446(e) and the regulations under section 446(e) apply.

[T.D. 9636, 78 FR 57706, Sept. 19, 2013]

Cross-references

Computed from the citations in the text of 26 CFR.

Code sections it cites

Regulations it cites

§ 1.446-1 General rule for methods of accounting.

Cited by 3 other regulations

Amendment history

From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.

September 19, 2013Issued by T.D. 9636 (78 FR 57706)

Where it sits in 26 CFR

Subchapter A Income tax
Part 1 Income taxes
Itemized Deductions for Individuals and Corporations