Property Management
What is a 'capital improvement' versus 'operating expense' in Delaware property management?
ACapital improvements are funded by tenants; operating expenses are paid by the landlord
BA capital improvement adds value, extends useful life, or adapts the property to a new use; an operating expense maintains the property in its current condition✓ Correct
COperating expenses are tax-deductible; capital improvements never are
DCapital improvements are made only to commercial properties; operating expenses apply to both
Explanation
Capital improvements (CAPEX) are expenditures that add value, extend the property's useful life, or adapt it to new uses — like a new roof, HVAC replacement, or building addition. Operating expenses (OPEX) maintain the property's existing condition — like routine maintenance, utilities, and property management fees. The distinction matters for tax treatment and cash flow analysis.
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