Question

On 30 March 2019, ABC LLC sold an office building it had placed in service on 1 May 2016. The building had an initial basis of $400,000 Determine the depreciation deduction for 2019, the year of sale.

Answer 1

Per IRS, an office building is depreciated over 39 years since it is a Non-Residential real property. Additionally, such prooperties are depreciated using the Mid-month convention. Under the Mid month convention, an asset is considered sold or disposed during the mid point of the month and the depreciation expense during the month the asset is sold is limited to 50% of the actual depreciation expense. Since the asset was sold on 30th March, 2019, the depreciation expense for 2019 is limited to :- 2 full months of service + 50% of month(march) = 2.5 months

The depreciation expense for 2019 is calculated as:-

= $400,000 * 2.564% * 2.5 months/12 months

=$2,136.67

Depreciation expense for 2019 = $2,137(Rounded)

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