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Repair or Improvement?

I know the definitions of a repair and an improvement according to the IRS, but we all know that things can be "interpreted" in different ways. I want to hear your opinion.

My front porch of my Victorian rental was in bad shape. The corner had dipped 9 inches based on poor water drainage which pulled on the entire porch + roof.

A contractor repaired the porch to its original solid state, as well as replaced the roof, gutters, etc that was attached to the porch ( as those were failing miserably as well). One could say "these were repairs", but you could also say "they add to the value of the property and extend its useful life (i.e an improvement)".

Your thoughts?

Reply to
SMan
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repairs

Reply to
Wallace

Repairs return the property to it's usefulness and expected life before the damage occurred. You describe currently deductible repair expenditures.

Reply to
Bill Brown

It sounds somewhat like that, but also extends its useful life. Making up numbers, a roof normally lasts 30 years. This was 10 years old when the damage occurred (so 20 years remaining life). After being replaced, it has 30 years remaining life.

So it seems like partly each; it's not like you can get the roof replaced with a "10-year-old used roof" to keep the remaining life the same as it would have been without the damage.

Seth

Reply to
Seth

but if a roof is 30 years old, and you "replace it" (not changing the underlying structure), it is still just a repair, not an improvement.

Reply to
Wallace

I disagree. You have to look to the original live of the entire property NOT just the piece being worked on. In your example, if the original useful life of the HOUSE was 30 years and the roof got replaced in year 11. The new roof might have a new life of 30 years BUT the useful life of the HOUSE did not change, its still at the original 30 years with 20 years remaining.

This is a REPAIR as described by the OP.

Now, I'll give you a twist - see how you like this:

House is 10 years old and came with 30 year asphalt shingles. In year 11 a tree falls on the roof and the roof gets replaced - with 100-YEAR Spanish Tile!

NOW, we have a split between repairs and improvements. The cost to replace the original shingle roof would be a repair, the extra cost to put on a tile roof would be an improvement.

Gene E. Utterback, EA, RFC, ABA

Reply to
Gene E. Utterback, EA, RFC, AB

What if the original life of the house is 50 years, except the roof will only last 30? After 10 years, it gets replaced with a new

30-year roof, extending the life of the house (unless you consider replacing the roof at 30 years as maintenance; but in that case, the useful life of the house is infinite, with enough maintenance).

What was the original life of the house?

It's based on cost, not life? Suppose the 100-year tile cost the same, because shingles suddenly got very expensive at least temporarily?

Seth

Reply to
Seth

The actual useful life of a depreciable asset has little to do with the recovery period under the tax law.

The actual mean time between failures has even less to do with whether an expenditure is a repair for tax purposes or a capital item that must be depreciated.

Reply to
Bill Brown

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