Aon – Tax Court finds that replacing a parking garage roof with one better designed to deal with a problem was currently deductible

The roof for an underground parking garage deteriorated much more quickly than expected since it also served as a platform for ground level traffic, which resulted in significant water and salt damage. It was replaced with a better-designed roof to deal with these problems.

In finding that the $4 million repair expense was currently deductible, Jorré J noted the engineering improvements (see also Shabro) but, at the end of the day, gave weight to the facts that the garage was an integral part of a larger asset (an apartment complex) and “there is no improvement in the functionality or profitability of the garage and … there is no reason to conclude that the work has had any significant effect in terms of increasing the value of [the complex] compared to its value with the garage in a good state of repairs.”

Neal Armstrong. Summary of Aon Inc. v. The Queen under s. 18(1)(b) – capital expenditure v. expense – improvements v. repairs or running expense.