Question

Lauren and Rob are getting divorced. As part of the divorce settlement, Lauren receives a vacation home worth $1,000,000 at the time of the divorce. The couple purchased the vacation home 12 years ago for $250,000. Lauren decides to convert the vacation home to rental property and begins renting the property on September 1, 2019. What is Lauren’s depreciation in year 2019? What is Lauren’s depreciation in year 2020?

Answer 1

Solution:

Purchase Price of Vaccation Home= $250,000

Tenure= 12 Years

Lauren Recevies a vaccation home= $1,000,000

As per the valuation there is appericiation of approax 25% Every Year.

we are considering 2020 as settlement year So, When he started renting on September 1, 2019, The fair value of Home would be $916,667 and from September 1 to present day its using as Renting Purpose.

Lets Assume Depreciation @ 10% Straight Line Method

Depreciation for 2019 where property has been used for 4 months

$916,667*10%= $91,667

for four month $91,667*4/12=$30,556

Depreciation For 2020,

on the salvage value of property @ $969,444

Depreciation wil be $96,944.