You purchased a residence for $550,000. The land is worth 29% of the purchase price. You immediately built an addition to the house for $22,000. The holding period is 5 years. The selling price is $730,000. What is the accumulated depreciation of the camp over the holding period?
The answer is $74,841. Please show how to get the answer. -Straight Line
Total purchase price = $550,000
Value of the land =29% = $159,500
Value of the building = $390,500.
Additions to the building =$22,000
Total value of the building = $390,500 + $22,000 = $412,500
Under MACRS, residential property is to be depreciated over a period of 27.5 years.
Annual rate of depreciation = 100 / 27.5 = 3.63%
Annual depreciation on the given property = 3.63% of 412,500 = $14,973,.75
Depreciation for 5 years =$14,973.75 * 5 = $74,868.75 (rounding off difference)
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