- 13 -
the expenditures were capital improvements, but, as part of a
general plan of rehabilitation, she argues that all of the
expenditures nevertheless must be capitalized.
In United States v. Wehrli, 400 F.2d 686, 689-690 (10th Cir.
1968), the Court of Appeals for the Tenth Circuit stated:
the courts have superimposed upon the criteria in the
[Commissioner's] repair regulation an overriding precept
that an expenditure made for an item which is part of a
"general plan" of rehabilitation, modernization, and
improvement of the property, must be capitalized, even
though, standing alone, the item may appropriately be
classified as one of repair. * * * Whether the plan
exists, and whether a particular item is part of it, are
usually questions of fact to be determined by the fact
finder based upon a realistic appraisal of all the
surrounding facts and circumstances, including, but not
limited to, the purpose, nature, extent, and value of the
work done, e.g., whether the work was done to suit the needs
of an incoming tenant, or to adapt the property to a
different use, or, in any event, whether what was done
resulted in an appreciable enhancement of the property's
value. [Fn. ref. omitted.]
Petitioner continued to use the two barns and the granary for the
same business purposes after the repairs as she did before the
repairs. The capital expenditures to install support rods and a
water heater, to divide a stall into two foaling stalls, and to
demolish a sheep shed and a cow stable were not substantial. The
only substantial capital expenditures were $6,300 for demolition
of a house and a storage building and removal of debris on the
Rhodes property. These costs were not deducted by petitioner and
do not relate to any building that was repaired. "To our
knowledge, every case in which the rehabilitation doctrine has
been applied to date has involved substantial capital
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