HI Bob,

Thanks for the reply. So the taxpayer owns a commercial building. A new tenant just leased a floor. So the taxpayer demolished the old tenant improvement's floor. Yes, they were the ones who originally installed the tenant improvement. Yes, they have been depreciating it and there was some basis left. 

Yes, some of the rules have changed. I don't believe that 263A applies however because the demolition costs are related to the old asset.