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Updated almost 7 years ago on . Most recent reply
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Sewer line fix capitalize or expense
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?
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Originally posted by @Ashish Acharya:
...
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?