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On April 1, Radcliff Corporation, a calendar year taxpayer, purchased land, a warehouse, and used equipment...

On April 1, Radcliff Corporation, a calendar year taxpayer, purchased land, a warehouse, and used equipment (7-year property) for a total price of $500,000. An appraiser determined that the land has a value pf $220,000, the warehouse valuse of $264,000, and the equipments a value of $66,000. If Radcliff does not elect Section 179 expensing, what is its depreciation expense for this first year?

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Answer #1

The depreciation expense for first year consists of depreciation expense on the warehouse and used equipment.

The recovery period for nonresidential property i.e. warehouse equals 39 years and used equipment is 7 years

Depreciation expense for warehouse = 1.819% * $ 264,000

Depreciation expense for warehouse = $ 4,802.16

Depreciation expense for equipment = 17.85% * $ 66,000

Depreciation expense for equipment = $ 11,781

Depreciation expense for the first year = $ 4,802.16 + $ 11,781

Depreciation expense for the first year = $16,583.16

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