### Question
How does Determination of Tax Liability define substantial improvement?


### Answer
Under *26 U.S.C. § 42*, **substantial improvement** is defined as:

> the improvements added to capital account with respect to the building during any 24-month period, but only if the sum of the amounts added to such account during such period equals or exceeds 25 percent of the adjusted basis of the building (determined without regard to paragraphs (2) and (3) of section 1016(a)) as of the 1st day of such period

#### Citation:
  - *26 U.S.C. § 42*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter A-Determination of Tax Liability > PART IV-CREDITS AGAINST TAX > Subpart D-Business Related Credits**

