Fedex Corp. v. United States
United States District Court for the Western District of Tennessee
291 F.Supp.2d 699 (2003)
Relevant factsFree
FedEx (plaintiff) owned airplanes and serviced their engines as required by FAA rules; servicing required removing the engine, at a cost typically 1 to 8 percent of the airplane's value. FedEx deducted these costs as ordinary business expenses. The IRS determined the costs should instead be capitalized, assessing FedEx an additional $70 million in taxes. FedEx sued the government (defendant) for a refund.
IssueFree
Whether, under federal tax law, a taxpayer must capitalize expenses that materially add value to property or restore it to a like-new condition, when the expenses are for routine maintenance of a component removable from a larger unit of property.