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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 Summary

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

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 ...

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