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Updated almost 7 years ago on . Most recent reply

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Mark Forest
  • Real Estate Investor
  • Fenton, MI
153
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946
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Sewer line fix capitalize or expense

Mark Forest
  • Real Estate Investor
  • Fenton, MI
Posted

Hello, I have asked this question before, but after doing research I must disagree with the original poster. I spent almost $5K to have a plumbing company dig a hole in my yard and put a $6 boot on a cracked sewer line. I see this as an expense even though it was quite costly. According to my research a capital asset is:

The IRS indicates what constitutes a real property capital improvement as follows:

Fixing a defect or design flaw

Creating an addition, physical enlargement or expansion

Creating an increase in capacity, productivity or efficiency

Rebuilding property after the end of its economic useful life

Replacing a major component or structural part of the property

Adapting property to a new or different use

A repair is as follows:

Improvements that "keep" property in efficient operating condition

Restores the property to its previous condition

Protects the underlying property through routine maintenance

Incidental Repair to property

Reference is http://www.dbbllc.com/newsletters/focus/mar2012/irs-clarifies-capital-improvement-vs-repair-expense

Next time I will rent a small excavator, dig my own hole, and put on a Fernco. Done! Isn't this very expensive repair restoring the property to its previous condition?

Most Popular Reply

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Steve Babiak
  • Real Estate Investor
  • Audubon, PA
8,349
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13,451
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Steve Babiak
  • Real Estate Investor
  • Audubon, PA
Replied
Originally posted by @Ashish Acharya:

@Mark Forest

...

If you had just patched the crack that would be repair. You replaced the whole thing. This is same as replacing Roof or repairing few shingles. 

...

From what I read, he did not replace the whole thing; the plumber just applied a $6 coupling to patch the cracked section.

So does that change how this should be approached tax-wise?

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