Memorandum Findings of Fact and Opinion

SMITH, Judge: This proceeding is for the redetermination of a deficiency in income tax for the calendar year 1941 in the amount of $413.47. The petition alleges that the respondent erred in disallowing the deduction from gross income of $2,763.76 spent by him for repairs on a farm operated by him.

Findings of Fact

The petitioner is a resident of Canton, Ohio. He filed his income tax return for 1941 with the collector of internal revenue for the eighteenth district of Ohio, at Cleveland.

In the fall of 1940 the petitioner purchased a 143 acre farm located near Canton. The purchase price of the farm was $16,500. The buildings were valued at $3,075 and1945 Tax Ct. Memo LEXIS 89">*90 the land at $13,425.

Petitioner did not live on the farm; it was operated by a tenant.

The buildings on the farm were as follows: A dwelling house, a barn 112 feet long and 50 feet wide, a garage, outbuildings consisting of a butcher house, a wash house, hogpen, chicken house, corn crib, coal house, and others.

The house on the farm is approximately 50 years old and many of the buildings had been standing for a long period of years. The barn had five large doors, all of which were in bad condition. The roof on the straw shed was leaking in several places and the roof on the main house was "full of holes." The barn was badly in need of paint. The siding on the barn had to be replaced and the slate roof repaired. The concrete floor in the milk house was cracked and broken.

During 1941 the petitioner made extensive repairs to the farm buildings. He built a new hog house at a cost of $200 and put a new roof on the main house at a cost of $447. In all the petitioner expended in 1941 $2,763.76 on repairs. This amount included $647 for the construction of a new hog house and for the replacement of the roof on the main house.

The farm operated at a loss in 1941 but showed a profit1945 Tax Ct. Memo LEXIS 89">*91 for years subsequent to 1941.

In the determination of the deficiency the respondent disallowed the deduction from gross income of repairs in the amount of $2,763.76.

Opinion

The question presented is whether the petitioner is entitled to deduct from gross income the full amount of $2,763.76 spent for repairs on the farm buildings. The respondent has disallowed the deduction upon the ground that it was necessary to make these repairs in order to put the farm buildings in condition.

Section 19.23(a)-4 of Regulations 103 provides as follows:

SEC. 19.23(a)-4. Repairs. - The cost of incidental repairs which neither materially add to the value of the property nor appreciably prolong its life, but keep it in an ordinarily efficient operating condition, may be deducted as expense, provided the plant or property account is not increased by the amount of such expenditures. Repairs in the nature of replacements, to the extent that they arrest deterioration and appreciably prolong the life of the property, should be charged against the depreciation reserve if such account is kept.

The line of demarcation between repairs and capital expenditures is not in every case clear. The construction1945 Tax Ct. Memo LEXIS 89">*92 of new buildings, the replacement of a roof on a house, etc., are capital expenditures for the reason that the life of such improvements extends over a period of years. The statute contemplates that a taxpayer making such expenditures shall recover the positive improvements over the useful life of them.

From an examination of the entire record we are of the opinion that the major part of the "repairs" made by the petitioner to his farm buildings in 1941 were made in connection with farming operations of that year. The cost of the hog house and of the new roof on the dwelling house should be capitalized. The respondent is sustained in disallowing the deduction from gross income of $647. We hold that the balance of the disallowed repair expenditures are deductible from gross income.

Decision will be entered under Rule 50.