The addition of a permanent structural improvement or the restoration of some aspect of a property that will either enhance the property's overall value or increases its useful life. Although the scale of the capital improvement can vary, capital improvements can be made by both individual homeowners and large-scale property owners.


BREAKING DOWN 'Capital Improvement'
For example, if Jack buys a new hot water heater and tool shed for his property, both would be considered capital improvements to his house. Similarly, the creation of a new public park in the downtown area would also be considered a capital improvement for the city. In both these cases, the new additions would make the respective properties more valuable.

http://www.investopedia.com/terms/c/capitalimprovement.asp#i...



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Note added at 2 hrs (2016-02-01 12:42:50 GMT)
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General Principle of Capitalization:
The IRS indicates what constitutes a real property capital improvement as follows:
Fixing a defect or design flaw
Creating an addition, physical enlargement or expansion
Creating an increase in capacity, productivity or efficiency
Rebuilding property after the end of its economic useful life
Replacing a major component or structural part of the property
Adapting property to a new or different use
http://www.dbbllc.com/newsletters/focus/mar2012/irs-clarifie...
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