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improvements or betterments made to increase the value of any
property or estate”, or (2) “Any amount expended in restoring
property or in making good the exhaustion thereof for which an
allowance is or has been made”. Sec. 263(a)(1) and (2); Wolfsen
Land & Cattle Co. v. Commissioner, 72 T.C. 1, 14 (1979). Within
the scope of section 263(a)(1) are those amounts paid or incurred
(1) to add to the value, or substantially prolong the useful
life, of property owned by the taxpayer, or (2) to adapt property
to a new or different use. Sec. 1.263(a)-1(b), Income Tax Regs.
An important factor in determining whether the appropriate
tax treatment is immediate deduction or capitalization is the
taxpayer's realization of benefits beyond the year in which the
expenditure is incurred. INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 87 (1992); United States v. Wehrli, 400 F.2d 686, 689 (10th
Cir. 1968). This is not an absolute rule, however, as the
benefits of expenditures considered to be currently deductible as
repairs sometimes extend beyond the current year, as would be
true, for example, of the cost of replacing a broken windowpane.
United States v. Wehrli, supra.
Whether an expenditure may be deducted or must be
capitalized is a question of fact. INDOPCO, Inc, v.
Commissioner, supra at 86. Thus, “Courts have adopted a
practical case-by-case approach in applying the principles of
capitalization and deductibility.” Norwest Corp. & Subs. v.
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