Repairs, Improvements, and Startup Costs
Learn the decision pattern the exam can test, then apply it to a realistic taxpayer fact pattern.
What changes the answer?
A recurring payment or small invoice can still improve property, while a larger cost can sometimes qualify for a safe harbor.
A tax-practice scenario
A new business remodels space, replaces components, and pays pre-opening professional fees. Classify each cost separately.
Identify the taxpayer, entity, transaction, and tax period first. Write the controlling tests in order, apply only the relevant facts, and keep the reporting result separate from any planning recommendation.
Do not take this shortcut.
Using invoice amount alone to decide expense versus asset.
Turn the rule into recall.
Write the cost's purpose and affected unit of property before applying improvement and startup rules.
- ExplainState the governing distinction without notes.
- ApplyChange one fact in the scenario and predict the new result.
- RetrieveAnswer an unseen question, then review every option.
Official source and scope
This lesson follows the current PSI content outline and uses the IRS reference below for the underlying tax or practice framework. Always confirm current forms, instructions, thresholds, and effective dates before advising a taxpayer.