W. Bradford Davis and Tedde M. Rinker - Page 19

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          useful life substantially beyond the taxable year is a capital              
          expenditure.  Sec. 1.263(a)-2(a), Income Tax Regs.  Petitioners             
          are therefore not entitled to a deduction for payments to Levi              
          Moore.  Petitioners have not raised--and we do not address--                
          whether Dr. Rinker is entitled to capitalize and depreciate the             
          cost of the improvements made by Levi Moore.                                
               Petitioners also argue that payments to the computer                   
          technician were deductible repair expenses.  Under section 1.162-           
          4, Income Tax Regs.,                                                        
               The cost of incidental 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 * * *.  Repairs in the nature of replacements,                 
               to the extent that they arrest deterioration and                       
               appreciably prolong the life of the property, shall                    
               either be capitalized and depreciated in accordance                    
               with section 167 or charged against the depreciation                   
               reserve if such an account is kept.                                    
               Petitioners have not provided the Court with sufficient                
          evidence to determine whether the work done by the technician               
          should be deducted as a current expense or capitalized into the             
          cost of Dr. Rinker’s office computer and depreciated.  Therefore,           
          petitioners are not entitled to a deduction for the technician’s            
          fees.  See Rule 142(a).  Petitioners have not raised the issue of           
          whether they are entitled to a deduction for depreciation or                
          amortization with respect to the equipment.  We therefore do not            
          address it.                                                                 







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