The property must be produced by you for use in your trade or business or for sale to customers. You cannot capitalize interest related to property that you acquire in any other manner. Interest you paid or incurred during the production period must be capitalized if the property produced is designated property.
Designated property is any of the following.
Tangible personal property with a class life of 20 years or more. Tangible personal property with an estimated production period of more than 2 years. Property you produce. You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow it. Treat property produced for you under a contract as produced by you up to the amount you pay or incur for the property.