Jerome S. Moss, Sandra Moss, Sharon M. Alesia, Herb Alpert, and Lani Alpert v. Commissioner of Internal Revenue

By this appeal, Jerome and Sandra Moss, Sharon Alesia, and Herb and Lani Alpert (“taxpayers”) challenge the tax court’s holding in Moss v. Commissioner, 51 T.C.M. (CCH) 742 (1986), that the taxpayers must capitalize certain normally deductible repair expenses totaling $270,268 because the expenses were incurred in conjunction with an overall plan of capital improvements to a hotel. The parties have stipulated to most of the relevant facts, and the taxpayers do not contest the tax court’s findings of other facts. We note jurisdiction under 26 U.S.C. § 7482 (1982) and reverse.

FACTUAL BACKGROUND

The taxpayers are general and limited partners in Almo Hotel Company, Ltd. (“Almo”), a California limited partnership. In 1976, the tax year in question, Almo was the sole fee owner of the Hyatt House Hotel (“the Hotel”), located near the Los Angeles International Airport. The Hotel was constructed in 1963 and was known as the International Hotel prior to 1975. It is a thirteen-story, reinforced concrete building with approximately 620 guest rooms, two large restaurants, two cocktail lounges, a large ballroom, more than a dozen smaller conference rooms, and numerous retail stores. The…