- 15 -
often extend beyond the current year. See United States v.
Wehrli, supra.
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
condition, then they are repairs and are deductible.
[Moss v. Commissioner, 831 F.2d 833, 835 (9th Cir.
1987) (quoting Estate of Walling v. Commissioner, 373
F.2d 190, 192-193 (3d Cir. 1967), revg. and remanding
45 T.C. 111 (1965)), revg. T.C. Memo. 1986-128.]
See also Illinois Merchants Trust Co. v. Commissioner, 4 B.T.A.
103, 106 (1926) ("In determining whether an expenditure is a
capital one or is chargeable against operating income, it is
necessary to bear in mind the purpose for which the expenditure
was made.").
In Plainfield-Union Water Co. v. Commissioner, 39 T.C. 333,
338 (1962), the Court articulated a test (the Plainfield-Union
test) for determining whether an expenditure is capital by
comparing the value, use, life expectancy, strength, or capacity
of the property after the expenditure with the status of the
property before the condition necessitating the expenditure
arose. See Norwest Corp. & Subs. v. Commissioner, 108 T.C. 265,
279-280 (1997).
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