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Distinguishing Between Capital Expenditures And Ordinary Business Expenses: A Proposal For A Universal Standard, Steven J. Greene

University of Michigan Journal of Law Reform

It is apparent from an examination of the various court decisions that there is no single, common standard used to distinguish between capital expenditures and ordinary business expenses. The courts are not completely to blame for this situation, however, because the Internal Revenue Code provides little guidance on the capital/ordinary distinction. This Note proposes an amendment to the Tax Code that would provide courts with a universal standard to apply in differentiating between the two types of expenditures and that best reflects the general purpose of the Code in matching income with its related expenses. Part I analyzes the historical …