Repairs vs. Improvements

[pricermd]

Should the resurfacing of a parking lot be a reapir or should we capitalize it. The total cost was $20,000+ for this client... which has assets at about $1M.?

The tax book uses an example of "replacing a gravel driveway with concrete" as an improvement, however, this was resurfaced (blacktop)

The parking lot was in bad shape, so this was not just cosmetic...it needed to be done.

What do you think?

[TaxLadyinPA]

if it smells like Asphalt ....

It's a parking lot .... LOL (Oh help me .. tell me April 15 is near)

the age old question that will be asked at least 100 times every season by 100 clients..... Is it a repair or improvement...

my 2 cents worth of knowledge says: If it's a pothole repair it, if you did the entire parking lot you just increased the value of the property so depreciate it.

do a Google search your capitalizing repairs and you will get all kinds of answers.

such as:
if the expenditure is for a permanent improvement, or has the effect of increasing the property's value or appreciably prolonging its life, the expenditure must be capitalized (Sec. 263(a); Regs. Sec. 1.162-4).

Good luck

[gkaiseril]

Resurface

If it was just a resurfacing I would call it a repair becuase the underlying bedding of the parking lot was not replaced in part or in whole and one is talking about the entire parking lot structure not just the top surface. Just like covering a roof with new shingles but not replacing the rotten rafters on has not appreciably extedned the life of the roof, but if there is a tearoff of all the old roofs and repair of the roof rafters, subsurface and top covering then one has extended the life of the roofing structure and not just the top surface.

[ChEAr$]

I second the notion

it's a repair.

Unless you don't need the deduction, then it's capitalized. (grin

[Roland Slugg]

Repair

FWIW, I also concur that a parking lot resurfacing/restriping is a deductible repair.