Personal Property Tests

The core test for determining if a dock is personal property is definitional.  Here’s an interesting quote that shows how CPAs are to handle the distinction between real and personal property.

In distinguishing between a building’s tangible personal property and structural components, CPAs will find the courts to be a final source of guidance. In Whiteco Industries, Inc. v. Commissioner (65 TC 664 (1975)), for example, the Tax Court set forth the following six questions CPAs can use to determine whether property is inherently permanent and thus a structural component excluded from the definition of tangible personal property:

• Can the property be moved? Has it been moved? (For example, a shed with a concrete floor vs. a shed with a wooden floor.)
• How difficult is removal of the property, and how time-consuming is it? (For example, a wine cellar vs. a prefabricated photo-processing lab.)
• Is the property designed or constructed to remain permanently in place? (For example, a wooden barn vs. a wire chicken coop.)
• Are there circumstances that tend to show the expected or intended length of affixation—or that the property may or will have to be moved? (For example, permanent concrete pilings vs. floating docks that can be removed in the winter.)
• How much damage will the property sustain upon its removal? (For example, a steel-encased bank vault vs. an easily removable lighting system attached by bolts.)
• How is the property affixed to the land? (For example, permanently glued bathroom tile vs. removable billboard.)

Applying the CPA tests to Marina Docks

The first test, whether marina docks can or have been moved, will vary by marina.  I’ve appraised marinas where they’ve never been removed (yet have come within a foot or two of floating off their piles during hurricanes).  I’ve also appraised marinas that remove the docks each winter and pile them along the side of a dry stack storage building or other location.  One key test is how a marina handled storms – did they remove the floating docks or not?

The second test, how difficult it is to remove the property and how time consuming, will also vary based on the type of docks present.  Wooden docks are fairly easy to remove.  Concrete docks are a whole other matter because not only are they heavy, they are inflexible, so there’s a risk of torquing and cracking if not done properly.  As support for this, I’d ask whether a marina owner and a few dock hands can remove a dock and store it on the site.  If professionals are not required, this makes the argument stronger that the dock can be moved without undue hardship.

The third test, whether the property is designed to be permanently in place, simply flows from the two tests above.  Heavy docks and concrete wave attenuators are difficult to sell as personal property; other types of docks are generally the opposite.

Test number four, showing the expected length of fixation, is mostly answered with the response in the parentheses above.  Concrete pilings would not be expected to be moved so they’ be fixtures.  Wood pilings can be moved and are removed when it’s necessary to replace them.  Wood pilings could also be pulled in the case of riparian leased marinas if the owner does not pay the bill (I appraised a marina once that was 3 days away from having the State pull the pilings due to non-payment, a mere pittance – when I pointed that out to the bank, they got a courier payment that day.  How mysterious:)

Test number five speaks highly for floating docks being personal property.  There is little that can be damaged by removing them.

The final test, whether the property is affixed to the land, is generally “no” for a floating dock.  You’ll find gangways that are affixed to the land but as for the dock itself, I don’t see it.

Pop Quiz Time!

So it seems from the above that a strong case can be made for wooden docks being personal property.  The key decider is whether the marina has ever taken down the docks.  If so, how many times and under what circumstances?  Every winter the time to do so is ideal and prior to storms is second best.  I have less optimism for concrete docks, especially if they have fuel pumps, buildings or wave attenuators on them.

Part 3 will discuss financial savings from having floating docks classified as personal property.  We’ll also provide some suggestions for how to economically go about getting floating docks reclassified as personal property.