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engines, as a matter of fact or law, should be treated separately
from the towboats.6
The tests for determining whether expenditures are
deductible maintenance expenses as opposed to capital
expenditures have remained fairly constant for more than 70
years. In 1926, the Board of Tax Appeals explained:
A repair is an expenditure for the purpose of
keeping the property in an ordinarily
efficient operating condition. It does not
add to the value of the property, nor does it
appreciably prolong its life. It merely
keeps the property in an operating condition
over its probable useful life for the uses
for which it was acquired. 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. * *
*
Manierre v. Commissioner, 4 B.T.A. 103, 106 (1926).
Those standards have persevered substantially unchanged. In
Plainfield-Union Water Co. v. Commissioner, 39 T.C. 333, 337
(1962), the tests or standard was expressed as follows:
An expenditure which returns property to the
state it was in before the situation
prompting the expenditure arose, and which
6 Respondent referenced a few opinions in which related
assets were treated separately in connection with the question of
expenses versus capital expenditures. In each instance, the
assets were separable and so treated by the owner/user.
Accordingly, the referenced cases are distinguishable.
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