Capitalization vs. Expense. Sam owns a small apartment building (this is the only rental building Sam owns). During the year Sam incurs the following expenditures:

Item

Amount

Replace roof and roof underlying structure because of building code requirements

$30,000

Repaint the interior

3,000

Repair door handles and door locks

1,000

Replace broken windows

1,500

Replace crumbling sidewalks and stairs because of building code requirements

25,000

Discuss the proper tax treatment for these expenditures.

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