A capital improvement to real property will always:
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increase the book value of the property by the amount the appraised value is increased.
Book value tracks cost basis, not appraised value; an improvement does not automatically increase book value by the appraisal lift.
increase the book value of the property by the cost of the improvement.
increase the property's market value by the cost of the improvement.
Market value reflects buyer demand and comparables; many improvements return less (or more) than their cost in market value, so this is not 'always' true.
be fully depreciated in the year the improvement is made.
Capital improvements must be capitalized and depreciated over their useful life (e.g., 27.5 years for residential rental); they are not fully deducted in the year incurred.
Why is this correct?
A capital improvement is added to the property's adjusted cost basis (book value) dollar-for-dollar under IRC § 1016(a)(1) — the basis increases by the actual cost of the improvement, regardless of how the market values the change. This makes the cost-to-book-value relationship the only universally true 'always' statement among the options.
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