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Repairs vs. Improvements: An Intractable Issue in U.S. Income Tax Law?

Boris I Bittker & Lawrence Lokken, Federal Taxation of Income, Estates and Gifts, Forthcoming

80 Pages Posted: 18 Dec 2013  

Lawrence Lokken

University of Florida College of Law

Date Written: December 13, 2013

Abstract

The issue is seemingly simple: Is an expenditure affecting tangible property used in business or held for investment currently deductible as a repair, or must it be capitalized as an improvement to the property? In practice, the issue has proven to be a major point of conflict between the IRS and businesses. The IRS and Treasury have worked for more than a decade to develop guidance for its agents and taxpayers that will reduce the number of factual disputes over this issue. These efforts culminated with the issuance in September 2013 of comprehensive regulations. The regulations do clarify many points of frequent contention, but they introduce another problem: The regulations are lengthy and very complex, with provisions affecting particular factual scenarios being scattered over scores of pages.

This paper provides an explanation of these regulations. It will be published in the treatise, Boris I Bittker & Lawrence Lokken, Federal Taxation of Income, Estates and Gifts.

Keywords: income taxation

JEL Classification: K34

Suggested Citation

Lokken, Lawrence, Repairs vs. Improvements: An Intractable Issue in U.S. Income Tax Law? (December 13, 2013). Boris I Bittker & Lawrence Lokken, Federal Taxation of Income, Estates and Gifts, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2367337

Lawrence Lokken (Contact Author)

University of Florida College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

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