Question

On April 1^st, Leo paid $310,000 for a residential rental property. The purchase price represents $250,000 for the building and $60,000 for the land. Five years later, on November 1^st, he sold the property for $400,000. Compute the MACRS depreciation for each of the five calendar years during which he had the property. It is a 27.5 year MACRS property

Answer 1

Answer

Total Cost of the Asset(residential rental property)= $250,000+$60,000 = $310,000

MACRS depreciation for the 5 calendar year during which Leo had property can be calculated directly from the part of IRS table shown here:

Year	Depreciation Rate
1	20%
2	32%
3	19.2%
4	11.52%
5	11.52%

• MACRS depreciation for the five calendar year can be calculated using the above table

Depreciations

1st Year

20%*$310,000 = 20/100*$310,000 = $62,000

2nd Year

32%*$310,000 = 32/100*$310,000 = $99,200

3rd Year

19.20%*$310,000 =19.20/100*$310,000 = $59,520

4th Year

11.52%*$310,000 = 11.52/100*$310,000 = $35,712

5th Year

11.52%*$310,000 = 11.52/100*$310,000 = $35,712