Company LR owns a commercial office building. Four years ago, LR entered into a long-term lease with Lessee M for 2,400 square feet of office space. LR spent $13,600 to finish out the space to meet Lessee M's requirements. The leasehold improvements included several interior walls and special-purpose electrical wiring. This year, Lessee M terminated the lease and moved out of the office space. To make the space more marketable, LR tore down the interior walls and removed the special-purpose wiring.
Identify the tax issue or issues suggested by the following situations, and state each issue in the form of a question