The present value of the tax savings of these up front deductions can be significant.
Law firms can benefit directly if they have material tenant-owned improvements.
Law firm clients can benefit if they own commercial or residential real estate. The Internal Revenue Service argued that this was simply component depreciation which is clearly not allowed under the code. The taxpayer argued that this was not component depreciation, but proper classification of various assets in a construction project. The court agreed with most but not all of the taxpayer's classifications. In a recent legal memorandum the Internal Revenue Service indicates it will not appeal the case as the court's reasoning is sound.