Does expensive foundation repair/ mold remediation to foreign rental property have to be called improvement based on cost? 25K $ repair, tenants present during work

[weberch]

Rental house in Germany. Current renters since 2014.  2018 Summer they noted water, mold (much mold) in basement. 2 separate contractors indicated repair HAD to be done to access walls w/ water issues. Some involved backhoe, otherwork from inside sandblasting walls to then add some cement. Mold remediation on top of that. Initial estimate 22K, while work being done they found another area that was an issue; additional 3K (25K total; rental income ~ 11K/year).  Tenants were living there WHILE this work was being done. Does not change the nature of the basement which cant be used for anything other than storage/ wash area (very old house/ certainly not liveable basement.  Value added would be nominal; very old house/ if ever sold, new buyer would likely raze the entire thing as land is worth more than house there.   Is the cost a redflag that IRS would not allow to be called a repair, or since this was necessary work to continue to allow liveability, can I call this a loss (repair exceeded income this year).  I view this as a repair, but I fear IRS will feel otherwise.

[Ashby]

This is an improvement.

[Opus 17]

It's an improvement subject to depreciation.  Not an repair in any sense of the term.  Although it is not an "improvement" in the sense of making the property "fancier", it is a "betterment" because the property would be unrentable without the work.  It also "extends the useful life of the property" which is another definition of an improvement.

It's also not a casualty loss unless caused by a sudden event that could not be anticipated (like a record flood or sudden bursting of an apparently sound pipe.)  If this was an issue that built up over time due to seepage etc, it's not a casualty.