- 11 - Sparky (dog) 150 Bubbles (dog) 150 Total 5,500 Winston was the offspring of one of petitioner's foals. There is no record of how Midnight and Bubbles were acquired. OPINION Whether Petitioner Must Capitalize Costs Related to Buildings It is conceded by respondent that petitioner incurred costs for the Rhodes and Whitefeather properties in the amounts listed on her 1991 tax return. The issue is whether petitioner must capitalize those costs. "The line of demarcation between deductible repairs and additions to capital is, of course, obscure." Stoeltzing v. Commissioner, 266 F.2d 374, 376 (3d Cir. 1959), affg. T.C. Memo. 1958-111. Amounts expended for ordinary and necessary incidental repairs and maintenance may be deducted by a cash basis taxpayer when paid, while amounts incurred to permanently improve property or increase its value must be capitalized and depreciated over the useful life of the improvement. Sec. 162(a); secs. 1.162-4, 1.263(a)-1(b), Income Tax Regs. The Court of Appeals for the Ninth Circuit has summarized the difference as: The often-litigated distinction between repair expenses and capital improvements has been characterized as the difference between "keeping" and "putting" a capital asset in good condition: The test which normally is to be applied is that if the improvements were made to "put" the particular capital asset in efficient operating condition, then they are capital inPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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