On April 27 of year 1 Javier purchased a building, including the land it was on,
ID: 2485851 • Letter: O
Question
On April 27 of year 1 Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,438,000; $308,000 was allocated to the basis of the land and the remaining $1,130,000 was allocated to the basis of the building. (Use MACRS)
a.
Using MACRS, what is Javier’s depreciation expense on the building for years 1 through 3?
What would be the year 3 depreciation expense if the building was sold on November 18 of year 3?
Answer the question in part (a), except assume the building was purchased and placed in service on March 11 instead of April 27.
Answer the question in part (a), except assume that the building is residential property.
e.
What would be the depreciation for 2015, 2016, and 2017 if the property were nonresidential property purchased and placed in service April 27, 1998 (assume the same original basis)?
b.What would be the year 3 depreciation expense if the building was sold on November 18 of year 3?
Explanation / Answer
a) Depreciation for 3 years: date recovery placed in original years method period service basis rate % depn 1 SL 39 years 27-Apr 1130000 1.816 20521 2 1130000 2.564 28973 3 1130000 2.564 28973 b) year 3 depreciation expense if the building was sold on November 18 of year 3. Depreciation would be for 11 - half month = 10.5 months = 28973*10.5/12 = 25351 c) Answer the question in part (a), except assume the building was purchased and placed in service on March 11 instead of April 27. date recovery placed in original years method period service basis rate % depn 1 SL 39 years 11-Mar 1130000 2.030 22939 2 1130000 2.564 28973 3 1130000 2.564 28973 d) Answer the question in part (a), except assume that the building is residential property. date recovery placed in original years method period service basis rate % depn 1 SL 39 years 27-Apr 1130000 2.576 29109 2 1130000 3.636 41087 3 1130000 3.636 41087 e) What would be the depreciation for 2015, 2016, and 2017 if the property were non-residential property purchased and placed in service April 27, 1998. The depreciation for the three years would be $28,974 (2.564%)
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