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A repair is an expenditure for the purpose of keeping
the property in an ordinarily efficient operating
condition. It does not add to the value of the
property, nor does it appreciably prolong its life. It
merely keeps the property in an operating condition
over its probable useful life for the uses for which it
was acquired. Expenditures for that purpose are
distinguishable from those for replacements,
alterations, improvements or additions which prolong
the life of the property, increase its value, or make
it adaptable to a different use. The one is a
maintenance charge, while the others are additions to
capital investment which should not be applied against
current earnings. * * *
Illinois Merchants Trust Co. v. Commissioner, 4 B.T.A. 103, 106
(1926).
Whether an expense is deductible or must be capitalized
is a question of fact. See Plainfield-Union Water Co. v.
Commissioner, 39 T.C. 333, 338 (1962) (the test is whether an
expense materially enhances the value of property or appreciably
prolongs the life of the property). Amounts paid as part of a
general plan of capital improvement may be capitalized even
though the payment would be deductible as an ordinary and
necessary business expense if incurred separately. See Moss v.
Commissioner, 831 F.2d 833, 839-842 (9th Cir. 1987) (discussing
the rehabilitation doctrine), revg. T.C. Memo. 1986-128.
Petitioners contend that they may deduct expenses for legal
and professional fees, repairs, supplies, and services for the
Mesa Verde property.
In Kaonis v. Commissioner, T.C. Memo. 1978-184, affd.
without published opinion 639 F.2d 788 (9th Cir. 1981), we
distinguished between expenses that add to the value of the
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