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Discussion Forum Index --> Basic Tax Questions --> Capitalize expense or operating expense?
Discussion Forum Index --> Tax Questions --> Capitalize expense or operating expense?
Actionbsns (talk|edits) said:
| 10 June 2009
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| My client bought a large and very expensive piece of property in town and has done a major renovation on it. From the records it looks like he is paying the work crew as well as architects, design people, contractors, etc. He also has regular maintenance to the property. I'm booking the work crew as operating expense, but the professional people I'm booking to the renovation account to be capitalized along with swimming pools, spas, driveways, major landscape (as opposed to maintenance), tile, large purchases of materials, etc. As I'm booking it, I keep second guessing myself as to the labor costs. If I can't tell where the work crew has been spending their time, should they be a capital cost?
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JR1 (talk|edits) said:
| June 10, 2009
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| Does he have other jobs that they might be working on? If not, it's all capitalized to this job.
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Letto115 (talk|edits) said:
| 10 June 2009
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| Whatever he pays for maintenance is operating expense. Whatever he pays to improve the property is capitalizable. If the work crew does both maintenance and improvements, you will have to come up with a way to either track their time or apportion that expense.
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Letto115 (talk|edits) said:
| 10 June 2009
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| When I responded I was assuming that part of the building was in use (the part that maintenance is being done on). If that is not the case, it's all pre-operating expenses which get capitalized.
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Actionbsns (talk|edits) said:
| 10 June 2009
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| Thanks, I'll go back and reclassify the labor costs tomorrow to renovation costs. This is a property that will be used as a meeting facility of a very high quality and standard. The maintenance is the grounds - landscaping and such.
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