Store Here inc acquired a warehouse and land this year for $350,000. Of these $350,000, $75,000 was allocated to the land and $275,000 to the warehouse. Store Here began using the property of august 22. How much is Stores Here's max depreciation this year? (use the appropiate MACRS table in your textbook)
Under MACRS -MOdified Accelerated Cost Recovery System,
Which alloes a stated recovery period that is generally shorter than the asset's estimated useful life
The recovery period is identical for new/used property and salvage value is ignored and land cost is deducted.
-Under General depreciation system in MACRS
# for real estate properties like warehouse, office buildings, 39yr, straight line metod is used.
# Mid monnth convention is taken ie on ehalf of the month in which the property is purchased or disposed is taken
For the given problem
land and wareouse= $350,000
Warehouse cost= $275,000
Identifying the applicable MACRS factor using the MACRS depreciation table
=$275,000*1.605% ( as per MACRS Table)- taken as in the month the asset is put to use
=$4,413.75
Calculation
=$275,000*1/39*4.5/12
=$2,644.23
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