Furnaces Pty Ltd was advised by a local building inspector that one of the chimneys on its premises was unsafe and, unless it was repaired, the factory would have to be closed. Furnaces decided that it was not feasible to stop operations to repair the chimney, so they gained permission to build an alternative chimney adjacent to the old chimney, thereby allowing production to continue. They found that although the new chimney was substantially the same size and make as the old one, it was cheaper to build than it would have been to repair the old one. Also, the new chimney can better ventilate the weather, which was not available in the previous one. After the new chimney was erected, the old chimney was demolished.

Is any amount allowable as a deduction for the cost of the new chimney?

Also, elaborate on the following regarding this question:

1. General Deductibility Rules for Repairs

2. Identification of the case assisting in the decision-making of this question.

3.Thorough yet succinct discussion of the considerations required for repairs

4.Thorough yet succinct discussion on cases where expenses are not considered as repairs and therefore, no deduction is available.

5.Apply the rules and cases above and provide a conclusion on the deductibility of expenses.

Answer rating: 100% (QA)

Answer GENERAL DEDUCTIBLITY RULES FOR REPAIR 1 The IRS indicates what constitutes ... View the full answer