Capital Expenditure

Capital Expenditure means:
an improvement (as distinguished from a repair) that will have a life of more than 1 year. Capital expenditures are generally depreciated or depleted over their useful life, as distinguished from repairs, which are subtracted from the income of the current year. Former IRC (check if this IRC provision is current here) §263. Example 1: Collins adds a new 25-room wing to her motel, at a cost of $250,000. The new wing is a capital expenditure. Example 2: Baker, a rancher, has a fence that is in such poor condition that it cannot be repaired. He makes a $50,000 capital expenditure to replace the fence.

In other words: The cost of a permanent improvement to property. Such expenses, such as adding central air conditioning or an addition to his or her home, increase the property's adjusted tax basis.

U.S. and other Developed Countries International Tax Meaning

Expenditure on improvement rather than repair. Where expenditure is more closely connected with the business income-earning structure than its income earning capacity, it is capital expenditure.

Description and Definition of Capital Expenditure

Costs that are not currently deductible and that are added to the basis of property. A capital expense generally increases the value of property or lengthens its useful life. Repairs, on the other hand, only maintain the property. When added to depreciable property, the cost is deductible over the life of the asset.

Resources

See Also

Further Reading

• Capital Expenditure in the West's Tax Law Dictionary
• Capital Expenditure in “A Dictionary of Taxation”