                  T.C. Summary Opinion 2003-113



                     UNITED STATES TAX COURT



     THOMAS J. NORTHEN, JR., AND SHIRLEY COX, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5020-02S.             Filed August 13, 2003.


     Shirley Cox, pro se.

     Rebecca S. Duewer, for respondent.



     PAJAK, Special Trial Judge:    This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.   Unless otherwise

indicated, section references are to the Internal Revenue Code in

effect for the year in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.   The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.
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     Respondent determined a deficiency in petitioners’ 1998

Federal income tax in the amount of $13,854.    After a concession

by petitioners, the issue this Court must decide is whether

petitioner Shirley Cox (petitioner) is entitled to deduct the

cost of removing and replacing the roof-covering material and

related expenses on her commercial building.

     Some of the facts in this case have been stipulated and are

so found.   Petitioners resided in Belmont, California, at the

time they filed their petition.

     During 1998, petitioner owned a one-half interest in a

commercial building (building) at 590 Taylor Street, Belmont,

California.   The building contains 23,000 square feet of offices

and a warehouse.

     The building was rented to Environmental Care Inc.

(Environmental).   One of Environmental’s jobs was to provide all

the Christmas decorations for the World Trade Center in San

Francisco, California.   During the year in issue, the roof

leaked, damaging Environmental’s materials.    Environmental’s

personnel complained to petitioner and even threatened legal

action.

     Petitioner hired Armstrong Roofing (Armstrong) to stop the

leaks and install a foam roofing system.   The acting roof

superintendent (superintendent) examined the roof and found it

“basically * * * intact” except for one location “where water was
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coming through, almost like a river.”

     Twenty eight sheets of plywood on the roof were replaced due

to dry rot.    The superintendent explained that it was not

necessary to remove the tar and gravel from the roof.    However,

Armstrong’s company policy was to remove all tar and gravel down

to the plywood roof, spray the primer on, and top it off with a

spray polyurethane foam coating.    There were no structural

changes made to the roof.    The entire roof was sprayed to protect

Armstrong against any potential liability in the future.

     The leaks were located under the rooftop air conditioning

unit.    In order to gain access to that area and stop the leaks,

petitioner’s contractors had to move and replace the air

conditioner with a crane, place supports under the air

conditioner when it was replaced, disconnect and reconnect the

gas lines, and install new electrical conduits.

     Respondent disallowed a repair expense deduction of $52,880,

allowed a $656 depreciation deduction, and made an automatic

adjustment.    Respondent determined that $3,572 of the $52,880 had

not been substantiated and that the remaining $49,308 was a

capital expenditure.    At trial, petitioner did not address the

substantiation issue, and on brief petitioner conceded this

issue.

     Petitioner claims that the roof-covering expense incurred is

a deductible expense; respondent argues that it is a capital
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expenditure.

     Section 162(a) allows the deduction of all ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on a trade or business.    The cost of incidental repairs

to property is deductible if those repairs neither materially add

to the value of the property nor appreciably prolong the life of

the property.    Sec. 1.162-4, Income Tax Regs.   Repairs in the

nature of replacements, to the extent that they arrest

deterioration and appreciably prolong the life of the property,

must generally be capitalized and depreciated in accordance with

section 167.    Id.   Further, section 263(a) provides that no

deduction shall be allowed for permanent improvements or

betterments made to increase the value of any property.

     The issue in this case has been considered previously by

this Court in Oberman Manufacturing Co. v. Commissioner, 47 T.C.

471 (1967).    In that case, the Court held that the cost of

removing and replacing roof-covering material (as well as the

cost of inserting an expansion joint in the roof) was a

deductible expense.    The Court observed that “it is necessary to

take into consideration the purpose for which an expenditure is

made in order to determine whether such expenditure is capital in

nature or constitutes a current expense.”     Id. at 482.   The Court

in Oberman Manufacturing Co. further observed that the taxpayer’s

only purpose in having the work done was to prevent leakage and
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keep the leased property in an operating condition over its

probable useful life and not to prolong the life of the property,

increase its value, or make it adaptable to another use.         Id.

There was no replacement or substitution of the roof.      Id.

     Here, as in Oberman Manufacturing Co., there was no

replacement or substitution of the roof.     Petitioner’s only

purpose in having the work done to the roof was to prevent the

leakage and keep her commercial property in operating condition

and not to prolong the life of the property, increase its value,

or make it adaptable to another use.     Petitioner’s expenditure

merely restored her commercial property to one with a roof free

of leaks.   That is why she hired Armstrong and the other

contractors.   The reason why Armstrong sprayed the entire roof

with foam was to protect Armstrong against future liability.           On

this record, we hold that petitioner is entitled to deduct the

expenditure in issue.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                            Decision will be entered

                                       under Rule 155.
