Rental house had major termite damage. Porch, support studs, walls, etc. Spent over $7,200 to repair. Of course he would like to expense. But these "repairs" do increase the value and lengthen the life of the house. Without them it probably would fall down someday and noone would pay otherwise good value without them being done or getting an allowance, even in CA. I'm thinking capitalize on these points but looking for confirmation or else approval to expense. Opinions? Thanks. ~ Barbara
Seems any repair or maintenance could be capitalized, on that logic. IMO, this is a necessary repair and should be expensed. No improvement -- simply returning the property to the "pre-damage" condition. Bill
Using your definitions. there would be no "Repairs." Even a relatively small repair will increase the potential sales price; a buyer will have a price in mind and subtract any "repairs" that he believes must be made. Repairs also restore value or useful life. If there had been no termite damage when the property was acquired, that $7,200 was merely restoring that value. On the other hand, if the damage occurred before the property was purchased, then it is not "restoring value" but actually increasing it. Thus, if the TO owned the house for some time, I would say the termite work was a repair. Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans
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