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property in an ordinarily efficient operating condition. See sec.
1.162-4, Income Tax Regs.
Deductions are exceptions to the norm of capitalization.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). An income
tax deduction is a matter of legislative grace; the taxpayer bears
the burden of proving its right to a claimed deduction. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
In Illinois Merchants Trust Co. v. Commissioner, 4 B.T.A. 103,
106 (1926), which involved the cost of shoring up a wall and
repairing a foundation needed to prevent a building from
collapsing, the Board of Tax Appeals drew the following
distinctions:
To repair is to restore to a sound state or to
mend, while a replacement connotes a
substitution. A repair is an expenditure for
the purpose of keeping the property in an
ordinarily efficient operating condition. * *
* 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. * * *
The distinction between repairs and capital improvements has also
been characterized as follows:
"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 in
nature. If, however, they were made merely to
'keep' the asset in efficient operating
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