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chargeable to capital. The cost of improvements and betterments
made to a taxpayer’s property are among the items properly
chargeable to capital. Sec. 1.1016-2(a), Income Tax Regs.
Renovations to a property and legal fees paid in defense of title
have long been accepted as capital expenditures. Woodward v.
Commissioner, 397 U.S. 572 (1970); LaPoint v. Commissioner, 94
T.C. 733 (1990).
A taxpayer is required to keep permanent books of account or
records that are sufficient to establish the amount of gross
income, deductions, and other information required to be shown on
an income tax return. Sec. 6001; sec. 1.6001-1(a), Income Tax
Regs. The Commissioner’s determination is presumed correct; the
burden is on the taxpayer to substantiate any basis increase
beyond what is determined by the Commissioner. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933); Knauss v.
Commissioner, T.C. Memo. 2005-6; see supra note 4.
Petitioners reported the following amounts as capital
expenditures which increased petitioners’ basis in the residence:
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Last modified: May 25, 2011