Roof on rental property expense vs captalize

[lydia33]

Went to tax school taught by Bob Jennings...in his teaching he seemed to think it okay to expense the roof as an expense. You are really just replacing the shingles and tar paper. I wonder if anyone knows a court case that I might refer to?

[jainen]

>>I wonder if anyone knows a court case that I might refer to?<<

I love your understatement! There are dozens of rulings on different levels. General answer: none, it all depends on the specific circumstances. Some things are obvious--if you upgrade to steel, that's a capital expense. If you hang off a ladder with a bucket of mastic, that's a repair. In between can be pretty subjective, considering such things as the taxpayer's tolerance for audit risk.

Don't forget how important non-tax issues can be. An original jainen theory holds that much of the drop in real estate values derived from over-expensing rentals. Nobody beats Realtors for understanding Time-Value-of-Money. That negative cash flow looks great on Schedule E as a tax shelter, but as a P&L sellers can't justify high market values.