The taxpayers renovated their rental building to change from a flat to pitched roof. However, while the roof was uncovered, a heavy downpour occurred, ultimately resulting in mould problems, requiring most of the rental units to be redone (e.g., redoing the drywall, plumbing, electricity and bathrooms). In commenting on what portion of the repair expenditures was currently deductible. The Directorate stated:
It is evident that many of the expenses incurred by Taxpayers are of an enduring nature. For example, the modification to the roof, plumbing, electrical work (wiring and boxes), conversion of the heating system, installation of an intercom system, installation of a fire protection system and installation of air exchangers seem to be expenses that are of a capital nature.
However, expenses that are related to the restoration of the building to its original state should be considered as current expenses. For example, it would be reasonable to accept as current expenses the expenses incurred by the Taxpayers to remedy mould problems, which could include a cleaning and drying process and the replacement of drywall, floor coverings and insulation.
Finally, although the relative value of labour in relation to the value of the total property suggests that labour is a capital expenditure … this ratio is not necessarily decisive … . [T]he fact that work was not carried out earlier does not change the nature of the work when it is finished, regardless of its total cost. …
In Méthé [86 DTC 1364], the TCC stated that the increase in rental income was the most conclusive evidence that the work done by the taxpayer resulted in a nearly new building and not the same original building. … Thus, the increase in gross rental revenues in this case, for the years following the work, will be a factor that will allow us to conclude whether the expenses incurred by the taxpayers were current or capital in nature.