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    Capitalization vs. Expense for expenditures on a building

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    Capitalization vs. Expense.

    Rentals R Us incurs the following expenditures on an apartment building it owns:

    Item Amount
    Replace the roof $25,000
    Repaint the exterior 7,000
    Install new locks 1,500
    Replace broken windows 1,200
    Replace crumbling sidewalks and stairs 7,000

    Discuss the proper tax treatment for these expenditures.

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    Solution Preview

    First, the general rule with respect to capitalization of items: if the expenditure extends the life or increases the value of the property, then it is a capital expense.

    Replace the roof is a capital expenditure because it extends the ...

    Solution Summary

    The 164 word solution provides a sentence of explanation for eachof the items for an apartment building.