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Capitalization vs. Expense for expenditures on a building

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.

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.

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