Tangible Property Regulations Repairs Review Toolkit
February 6, 2015
Deductibility of a repair expenditure is based on a taxpayers facts and circumstances. Below is a series of questions to ask to finally arrive at the answer of deductibility. The following questions can help in making the determination. However, the following questions are not all inclusive and an answer to one question may lead to another question to ensure clarification and understanding of the facts and circumstances.
I. General Questions
II. What is the Unit of Property that is repaired or improved?
Real Property Questions
What is the building structure or system repaired or improved?
Is the taxpayer the lessor or owner of the building?
Yes – go to Improvement Standards section below
No – go to Leased, Co-op or Condo subsection
Personal Property Questions
Is the property used in a manufacturing or industrial process?
Yes – Is the property a network asset such as a pipeline, railroad, or power line?
No – Can the repaired or improved asset function interdependently? If no, expand your view of the asset until you can
identify the asset and all its components that function interdependently.
What component or group of components performs a discrete and major function or operations?
Leased, Co-op, or Condo Property Questions
If lessee, what portion of building or building system is subject to the lease?
If the entire building is leased, then the 9 units of property for the entire building is the unit of property.
If a portion of the building is leased, then the UOP is the leased portion of each building structure and each building system.
If Co-op, is the taxpayer’s ownership interest in the entire building?
III. Apply each improvement standard tests below to the expenditure in question relative to the unit of property.
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