3. Capital gain, capital improvements, and repairs relative to real estate investment property When a real estate investment is sold, a capital gain is realized when the sale price is the cost of The cost of repairs is almost A capital improvement repairs the seller's original purchase price tax deductible from the cash flow generated by the real estate investment. the value of the property and a repair the value of the property. Expenditures on the physical property itself fall into two categories: capital improvements and repairs. Complete the following table, and for each item, indicate if it describes a capital improvement or a repair: Snow shoveling Replacing cheap, laminate countertops with custom granite countertops Window washing Replacing shower stalls with Jacuzzi bathtubs Replacing light bulbs Installing an alarm system Capital improvement Repairs