{"id":10323,"date":"2012-12-03T13:02:31","date_gmt":"2012-12-03T18:02:31","guid":{"rendered":"http:\/\/nccumc.org\/treasurer\/?post_type=nccumc_faq&p=10323"},"modified":"2012-12-03T13:02:31","modified_gmt":"2012-12-03T18:02:31","slug":"capital_expend","status":"publish","type":"nccumc_faq","link":"https:\/\/nccumc.org\/treasurer\/faq\/capital_expend\/","title":{"rendered":"How do I distinguish between capital expenditures and repairs and maintenance when reporting on Table II?"},"content":{"rendered":"

We generally follow the same guidance as the IRS in the treatment of capital expenditures for tax return purposes. Here is some of that guidance:<\/p>\n

Regulations issued under section 263(a) provided that capital expenditures included amounts paid or incurred to (1) add to the value, or substantially prolong the useful life, of property owned by the taxpayer, or (2) adapt the property to a new or different use.<\/p>\n

Capital expenditures, in contrast [to a repair], are for replacements, alterations, improvements, or additions that appreciably prolong the life of the property, materially increase its value, or make it adaptable to a different use. A capital expenditure is generally considered to be a more permanent increment in the longevity, utility, or worth of the property.<\/p><\/blockquote>\n

Here is some guidance on how the IRS differentiates a capital expenditure from a repair (a repair and maintenance expenditure would be classified as an operating expense):<\/p>\n

In Estate of Walling v. Commissioner, 373 F.2d 190, 192-193 (3rd Cir. 1966), the court explained that the relevant distinction between capital improvements and repairs is whether the expenditures were made to \u201cput\u201d or \u201ckeep\u201d property in efficient operating condition. In Plainfield-Union Water Co. v. Commissioner, 39 T.C. 333, 338 (1962), nonacq. on other grounds (1964-2 C.B. 8), the court stated that if the expenditure merely restores the property to the state it was in before the situation prompting the expenditure arose and does not make the property more valuable, more useful, or longer-lived, then such an expenditure is usually considered a deductible repair. In contrast, a capital expenditure is generally considered to be a more permanent increment in the longevity, utility, or worth of the property.<\/p><\/blockquote>\n

Examples of capital expenditures<\/strong><\/span> as it relates to your church – reported on line \u00a074:<\/p>\n