Depreciation on real property is an allowable deduction for income tax purposes if the real property is:

The allowable deduction for depreciation on real property for income tax purposes applies specifically to improved properties. Improved real property refers to land that has been developed with structures such as buildings, which incur depreciation over time due to wear and tear or obsolescence. This process allows property owners to recover the cost of the property incrementally, providing a tax benefit.

Unimproved properties and vacant land do not qualify for depreciation deductions because they lack buildings or structures that would incur wear and tear; they are essentially static assets without the depreciation element associated with structures. Commercial properties also qualify for depreciation as long as they are improved. However, the crucial factor lies in the existence of physical improvements on the property.

Thus, the correct identification of improved properties as the basis for depreciation highlights the need for a structure to facilitate the tax deduction, which is key to understanding how real estate is treated for tax purposes.