The percentages in MACRS GDS for real property were calculated based on the foll

Question

The percentages in MACRS GDS for real property were calculated based on the following principles:

1. Residential rental property is depreciated in 27.5 years, and Nonresidential real property in 39 years.

2. Both classes use straight-line depreciation with a half-month of depreciation is allowed in the first month of placement.

3. Salvage value are assumed to be zero for all assets.

If a company purchased a commercial building at $30M in April 2011, how much depreciation can the company claim in 2011? 2012? 2049? 2050? Assume the purchase price included equal amount of land value and the price for the building.

Explanation / Answer

Commercial Building = Noon- Residential Property

Life = 39 years = 39*12 months

half months = 468*2 = 936 ;

In 2011 ;

months = April to December = 8*2 = 16 half months ;

So depreciation = $30*16/936 = $ 512820.5128 ;

value at dec 31, 2011 = $30 M - Depreciation = $ 29.487 million ;

in 2012 = $30M/39 = $ 769230.7692 ;

in 2049 = $30M/39 = $ 769230.7692 ;

in 2050 = 30/39 = $ 256410.2

IF you are talking about accumulated depreciation ;

In 2011 = $ 512820.5 ;

in 2012 = $ 512820.5 + 769230.77 = $1282051.3 ;

in 2049 = $29.74 million ;

in 2050 = $ 30 million ;

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