Question

75-76. Polly purchased a new factory building in April, 5 years ago for $5,000,000. On March...

75-76. Polly purchased a new factory building in April, 5 years ago for $5,000,000. On March 3, this year, the building was sold.

75.     To calculate the cost recovery in the year of disposition, the percentage from the table must be multiplied by:

a.

a.       2
b.

b.       1
c.

c.       2.5 over 12
d.

d.       3.5 over 12

76. The allowable cost recovery in the year of disposition is:

a.

a.       $26,708
b.

b.       $33,073
c.

c.       $66,146
d.

d.       $396,876
e.

e.       None of the above

e.       None of the above
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Answer #1

75 Ans is C 2.5 over 12

Explanation Since property is a non residential property its macrs life will be 39 years and as per mid month convention applicable on real estate property, depreciation can be claimed for half of the month , in which property is disposed off, so for this year 2 full month(January and February) and 1 half month (March) will be allowed that is 2.5.

76 Ans is A $26,708

Explanation: Depreciation for this year is $5,000,000 x .02564 x 2.5/12 = $26,708

Note: please ask in comment for any further help, Thanks.

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