- 12 -
nature. If, however, they were made merely to
"keep" the asset in efficient operating condition,
then they are repairs and are deductible.
[Moss v. Commissioner, 831 F.2d 833, 835 (9th
Cir. 1987), revg. T.C. Memo. 1986-128 (quoting
Estate of Walling v. Commissioner, 373 F.2d 190,
192-193 (3d Cir. 1967)).]
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).
Most of the expenditures at issue were for maintenance and
repairs; they simply kept the capital asset in efficient
operating condition. Prepping, treating, and painting wood,
repounding nails, replacing a relatively small number of tin roof
sheets, sealing nail holes, and painting roofs of buildings that
were already in operating condition do not constitute capital
improvements. These expenditures simply restored the buildings
to their previous condition without adding to the value of the
buildings or prolonging their life in a way that require the
expenditures to be treated as capital. However, replacing two
support rods on the Rhodes barn, dividing a stall into two
foaling stalls on the Whitefeather barn, and the installation of
a water heater in the Rhodes house are capital improvements.
Also, the costs of demolishing the sheep shed, the cow stable,
and the chicken coop on the Whitefeather property are
nondeductible. Sec. 280B. Respondent does not argue that all of
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011