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condition, may be deducted as an expense * *
*
Similarly, section 1.263(a)-1(b), Income Tax Regs., provides that
Amounts paid or incurred for incidental
repairs and maintenance of property are not
capital expenditures * * *
Conversely, section 263 provides that no deduction may be
taken for amounts expended for permanent improvements or
betterments made to increase the value of property. See also id.
The parties have taken refuge in particular nomenclature that
supports their position. There is no legal question to be
answered here--instead we must decide which party’s labeling is
supported by the record. Respondent uses the term “overhaul”5
and petitioners use the terms “routine maintenance”.
The parties’ positions reduced to a concise statement of
facts, are as follows: Petitioners contend that towboats,
including the engines, have an expected useful life of 40 years
and the procedures performed are routine maintenance to achieve
the expected useful life. Respondent contends that a towboat
engine has a 25,000- to 35,000-hour useful life (here 3 to 4
years), and it must be completely overhauled after such use.
5 On brief, respondent does not argue that the procedures
performed by petitioners’ employees is, by definition, an
overhaul, which includes a complete rebuilding of the engine.
Instead, respondent argues that the procedures performed are
equivalent in scope to an overhaul.
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