Vanalco, Inc., a Delaware S Corporation, Richard L. Smith, Tax Matters Person - Page 21




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          cleaning devices, in addition to increasing the safety of its               
          employees.  See id.                                                         
               On the facts of this case, we hold that Vanalco must                   
          capitalize the costs of replacing the brick floors of its cell              
          rooms with Fondag cement.                                                   
          The Plant Roof                                                              
               The plant roof is 122,567 square feet.  During the period              
          1989 through 1994, Vanalco removed and replaced 42,514 square               
          feet of roof decking and 78,197 square feet of roofing material.            
          In 1992, Vanalco removed and replaced 12,927 square feet of roof            
          decking and roofing material.                                               
               Petitioner argues that the replacement of the portion of the           
          roof in the year at issue was only to repair a leak and not part            
          of a plan of rehabilitation.  Respondent argues that the roof               
          repair was more than patching a few leaks, and that when this               
          repair is considered with the roof repairs performed in 1989                
          through 1994, it is evident that Vanalco had a plan to replace              
          most of its roof over a period of years.                                    
               Expenses incurred as part of a general plan of                         
          rehabilitation, modernization, or improvement must be capitalized           
          even though the same expenses if incurred separately would be               
          deductible as ordinary and necessary.  See United States v.                 
          Wehrli, 400 F.2d at 689; Norwest Corp. & Subs. v. Commissioner,             
          108 T.C. at 280.  An asset need not be completely out of service            





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