This chapter discusses two ways of treating certain costs--deduction or capitalization.

You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it.

If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. When you capitalize a cost, you add it to the basis of property to which it relates.

A partnership, corporation, estate, or trust makes the choice to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. Each individual partner, shareholder, or beneficiary chooses whether to deduct or capitalize exploration costs.

You may be subject to the alternative minimum tax (AMT) if you deduct any of the expenses discussed in this chapter, other than carrying charges and the costs of removing architectural barriers.