Taxpayers and the IRS have been arguing over capitalized costs for decades. Taxpayers want to deduct costs as they are incurred, while the IRS wants the costs to be deducted over the period they provide value to the taxpayer.
In November, 2010 the IRS released its Capitalization v. Repairs Audit Technique Guide. IRS auditors are now using this Guide for taxpayer audits. It explains what the agents are supposed to look for in reviewing changes in accounting method and evaluating repair expenses for capitalzation.