Capitalization vs. Expense. Sam owns a small apartment building (this is the only rental building Sam owns). During the year Sam incurs the following expenditures:
Item
Amount
Replace roof and roof underlying structure because of building code
requirements
$30,000
Repaint the interior
3,000
Repair door handles and door locks
1,000
Replace broken windows
1,500
Replace crumbling sidewalks and stairs because of building code
requirements
25,000
Discuss the proper tax treatment for these expenditures.
please type the answer dont write it by hand
Solution
Item Tax Treatment
1) Replace roof and roof underlying structure Capitalize $ 30,000 because of building code requirements and depreciate
2) Repaint the Interior Deduct $3,000 as an expense
3) Repair door handles and door locks Deduct $ 1,000 as an expense
4) Replace broken windows Deduct $ 1,500 as an expense
5) Replace crumbling sidewalks and stairs Capitalize $ 25,000 because of building code requirements and depreciate
Capitalization vs. Expense. Sam owns a small apartment building (this is the only rental building Sam...
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