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substantial nature to render it a capital expenditure.9 See
Stark v. Commissioner, T.C. Memo. 1999-1.
B. Carmichael Village Shopping Center Roof
Respondent argues that the cost of replacing the roof on the
Carmichael Village shopping center (suites 1-12) must be
capitalized. Petitioner argues that the work was in the nature
of repairs for the purpose of keeping the roof in ordinary
operating condition.
Mr. Graham, who also managed this roofing project, testified
as to the work completed. Mr. Graham testified that the
contractor of the original roof had done a poor job, and “we had
no choice but to tear it off and completely put a new roof on
it”. Mr. Graham further testified that “an entire roof” was
replaced, but only for 10 percent of the entire shopping center.
Mr. Graham stated that the new roof had a 10-year warranty.
Petitioner contends that our holding in Vanalco, Inc. v.
Commissioner, supra, applies to the case in issue, pointing out
that the taxpayer in Vanalco replaced only 10.6 percent of the
roof. We disagree. The facts in Vanalco are distinguishable
from the instant case. In Vanalco, there was no evidence that
9 Petitioner’s expert, Mr. Cox, testified that the tile
roof has a longer life expectancy than the builtup roof and
should not need to be replaced as often. The tile roof is a
separate component from the builtup portion with a different
useful life.
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