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A residential rental property is acquired during the first month of the taxable year, at a...

A residential rental property is acquired during the first month of the taxable year, at a total cost (including transaction costs) of $1.2 million. Of this amount, $200,000 is properly attributable to the land. Determine the annual depreciation allowance for the first year and for each of the ensuing nine years.

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Answer #1

As per the details given in the question, it is assumed that the life of property is 10 years.
Depreciable Allownace 1 year = 100000
total cost = 12,000,00
Cost of the land = 200000
Note - Land is never depreciated , therfore Depreciable amount is calculaed on 10,00,000
Life of Property = 10 years
depreciable allowance = 10,000,00 / 10
Depreciable allownce = 1,00,000 per year

Each year depreciable amount = 100000
note - Depreciable amount is calculated on straight line basis
Answer may be different if other method is used.

I hope this clear your doubt.

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