On April 17 of year 1 Javier purchased a building, including the land it was on,

Question

On April 17 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 $1,533,000; $393,000 was allocated to the basis of the land and the remaining $1,140,000 was allocated to the basis of the building. Use MACRS.

a. Using MACRS, what is Javier’s depreciation deduction on the building for years 1 through 3?

B. What would be the year 3 depreciation deduction if the building was sold on February 9 of year 3?

c. Answer the question in part (a), except assume the building was purchased and placed in service on February 17 instead of April 17.

Year . Depreciation Deduction

1
2
3

d. Answer the question in part (a), except assume that the building is residential property.

Year . Depreciation Deduction

1
2
3

What would be the depreciation for 2018, 2019, and 2020 if the property were nonresidential property purchased and placed in service April 17, 2001 (assume the same original basis)?

Year . Depreciation Deduction

2018
2019
2020

Year Depreciation Deduction 1 2 3

Explanation / Answer

a)

b)

Depreciation = $29230*(1.5/12)

= $3654

c)

d)

e)

Year Method Recovery Period Date Placed in Service Original Basis Rate Depreciation 1 SL 39 April 17 $1140000 1.816% $20702 2 $1140000 2.564% $29230 3 $1140000 2.564% $29230

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