Question

Mike Brady purchased an office building on April 12, 2019, for a total of $2.5 million...

  1. Mike Brady purchased an office building on April 12, 2019, for a total of $2.5 million of which $350,000 was the value of the land on which the office building was located.

Also, Mike purchased 7-year class new business equipment for $54,500 on May 11, 2019. He elects not to immediately expense the equipment under §179 and elects not to take the additional first-year depreciation. Mike purchased no other business assets during 2019.

  1. Determine Mike’s depreciation on the office building for 2019.

b. Determine Mike’s depreciation on the equipment for 2019.

c. If Mike sells the office building on October 29, 2024, how much depreciation deduction will Mike take for the office building for 2024?

d. If Mike sells the equipment on September 13, 2022, how much depreciation deduction will Mike take for the equipment for 2022?

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Answer #1

a) Total cost-2.5 million

Value of land = 3,50,000 (Land always appreciate)

Amount to be depriciated 25,00,000-3,50,000 = 21,50,000

Average life of office buildingis 60 years.

Depreciation for whole year = 21,50,000/60 = 35,834

Depreciation for 2019 (Apr to Dec) = (35,834/12)*9= 26875

b) Depreciation for whole year = 54500/7 = 7,786

Depreciation for 2019 (May to Dec) = (7786/12)*8 = 5,190

c) Depreciation for 2024 (Jan to Oct) = (35834/12)*10 = 29,861

d) Depreciation for 2022 (Jan to Sept) = (7786/12)*9 = 5,839

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