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does not make the relevant property more
valuable, more useful, or longer-lived, is
usually deemed a deductible repair. A
capital expenditure is generally considered
to be a more permanent increment in the
longevity, utility, or worth of the property.
Accordingly, in determining whether an expenditure should be
capitalized, we consider whether it has: (1) Adapted the
property for a new or different use, (2) appreciably prolonged
the life of the property, or (3) materially added to the value of
the property. Initially, there is no question that the
procedures performed did not adapt the engine for a new or
different use.
The question of whether the procedures appreciably prolonged
the life of the engine is more thought provoking. Obviously, if
the procedures performed by petitioners were not performed, the
expected useful engine life would be approximately 4 or 5 years.
Based on the record, the procedures are performed after about
25,000 to 30,000 hours of operation. In that regard,
petitioners’ towboats are operated about 8,000 hours per year.
With that much use, the maintenance procedures must be performed
every 3 or 4 years. Considering that there are 8,760 hours in
most years (365 x 24), 8,000 hours of use translates into the
towboat and engines’ being operated about 91 percent of the time,
or almost 22 hours of each day of a 365-day year.
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