Taxing of Capital Expenditure Funds in LLC

[Todd Magin]

How is the capex reserve fund handled tax-wise in an LLC (or S-Corp)?

Over the year, a portion of the rental proceeds are siphoned off into an account for future upgrades (roof, furnace, rehab, etc). Does that count as a business expense even though the actual upgrade is in a future year? Or do you pay taxes on those funds and take the deduction when the actual expense occurs?