Final answer:
Under MACRS, real property is categorized as residential rental property and nonresidential real property, with different recovery periods of 27.5 and 39 years respectively for depreciation.
Step-by-step explanation:
For MACRS (Modified Accelerated Cost Recovery System) purposes, real property is divided into two categories: residential rental property and nonresidential real property. Residential rental property includes any living space that is rented out for residential purposes, typically with a recovery period of 27.5 years.
Nonresidential real property, on the other hand, encompasses commercial structures like office buildings, shopping malls, and factories, with a longer recovery period of 39 years for depreciation purposes.