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Financial Planning / Tax Strategies


Subject:  Re: Peter Date:  6/21/2012  1:37 AM
Author:  irasmilo Number:  116313 of 129581

In addition, I have to replace the roof, but that is a capital expenditure.

Not so fast. The IRS has lost in Tax Court on that issue. (Oberman v. CIR, 47 TC 471 (1967)) If the replacement roof restores the roof's function but does not significantly change the function or extend the life of the structure (that is, the entire unit, not the roof) it is a repair, and not a capital improvement.

The IRS has proposed a new reg 1.263(a)-3 which clarifies some of these distinctions in light of the various Tax Court decisions, but I don't think it has been formally adopted as yet.

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