In connection with the tangible property “repair” regulations:

a. In one paragraph, differentiate between the three kinds of property improvements and in one short sentence, explain the general tax treatment of expenditures that fall into these categories.

b. Suppose your client owns a one-floor building that has two rooms.  In the larger retail store area in front, which has a high ceiling, she spends $500,000 adding a stairway and a mezzanine.   In the smaller office area in back, which has a drop ceiling, she spends $100,000 to remove the drop ceiling to expose existing windows to let in more light.  How should these two expenditures be treated for tax purposes?

c. Briefly define the concept of a “unit of property.”

d. Explain the significance of the business having an “applicable financial statement” in terms of the decision of whether to capitalize or expense an expenditure.

Answer rating: 100% (QA)

Answer a Real property is land and buildings Anyone who owns a house or a condo owns real property A mobile home is not real property because one does not own the land the vehicle sits on Personal pro... View the full answer