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The original plant roof had corrugated sheet metal roof-
support decking. However, at the time Vanalco repaired the roof
areas, the pattern of the original metal support decking was not
available. Because of the unavailability of the original
material, Vanalco used 2- by 6-inch tongue-and-groove fire
resistant wood decking to replace the corrugated metal decking.
Vanalco reported a repair expense of $115,346 for the
removal and replacement of the roof material and decking in 1992.
Discussion
Section 162 allows the deduction of "all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business". Section 1.162-4, Income Tax
Regs., provides:
The cost of incidental repairs which neither materially
add to the value of the property nor appreciably
prolong its life, but keep it in an ordinarily
efficient operating condition, may be deducted as an
expense * * *. Repairs in the nature of replacements,
to the extent that they arrest deterioration and
appreciably prolong the life of the property, shall * *
* be capitalized * * *.
On the other hand, section 263(a) provides that no deduction
shall be allowed for (1) "Any amount paid out for new buildings
or for permanent improvements or betterments made to increase the
value of any property or estate", or (2) "Any amount expended in
restoring property or in making good the exhaustion thereof for
which an allowance is or has been made." Sec. 263(a)(1) and (2).
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