Question

On May 20 of year 1 Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,337,000; $392,000 was allocated to the basis of the land and the remaining $945,000 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

b. What would be the year 3 depreciation deduction if the building was sold on January 18 of year 3?

Answer 1

The total cost of the purchase = $1,337,000

Allocated to the basis of the land = $392,000

Allocated to the basis of the building. = $945,000

Calculating 3 year depreciation deduction if the building was sold on January 18 of year 3

= $945,000*2.564%*0.5/12

= 1,009.575

$1,009.575 is the depreciation deduction for 3 year sold month january 1-0.5=0.5 months

Explanation

Building was sold on January 18

January was 1 month of the year

Formula

No of the month - 0.5

[1-0.5]/12

0.5/12

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