Kenneth G. Schladweiler - Page 13

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          determination that repairs to petitioner’s truck, necessitated by           
          an accident in 1994, must be capitalized.                                   
               Expenses incurred to maintain property used in a trade or              
          business in efficient operating condition ordinarily are                    
          deductible.  See sec. 162(a); Jacks v. Commissioner, T.C. Memo.             
          1988-237; Gilles Frozen Custard, Inc. v. Commissioner, T.C. Memo.           
          1970-73.  Likewise, the cost of repairs “which neither materially           
          add to the value of the property nor appreciably prolong its                
          life, but keep it in an ordinarily efficient operating condition,           
          may be deducted as an expense”.  Sec. 1.162-4, Income Tax Regs.;            
          see also sec. 1.263(a)-1(b), Income Tax Regs. (“Amounts paid or             
          incurred for incidental repairs and maintenance of property are             
          not capital expenditures”).                                                 
               Although it is not always easy to delineate when an                    
          expenditure is a deductible repair or a capital expenditure that            
          permanently improves property and increases its value, see                  
          section 263, the standard that we must use to evaluate a                    
          particular expenditure is well established.  In Plainfield-Union            
          Water Co. v. Commissioner, 39 T.C. 333, 337 (1962), we described            
          the standard as follows:                                                    
               An expenditure which returns property to the state it                  
               was in before the situation prompting the expenditure                  
               arose, and which 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.                   

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