On March 26, 2016, John Rebel acquired a commercial building as a short term inv

Question

On March 26, 2016, John Rebel acquired a commercial building as a short term investment. He paid $1,900,000 fort, of which $220,000 was the value of the land it was on. He plans to sell the property in July 2019 at an estimated price of $2,400,000. He has been using the MACRS method of depreciation for tax purpouses a. What is the cost basis of the property for depreciation purposes? b. Compute the depreciations for each of the years 2016, 2017, 2018 and 2019. c. What will be the BV of the property at the time of sale in 20197 a. The cost basis of the property is $1680000 (Round to the nearest dollar.) b. The MACRS depreciation the year 2016 1706923 (Round to the nearest dollar) The MACRS depreciation the year 2017 (Round to the nearest dollar,) The MACRS depreciation the year 2018 = $. (Round to the nearest dollar.) The MACRS depreciation the year 2019(Round to the nearest dollar) c. The BV at the time of sale in 2019ound to the nearest dollar.)

Explanation / Answer

a) Cost of building $1,680,000.00 b) Commercial real estate, has a recovery period of 39 years MACRs Depreciation 2016 = $1,680,000 x 2.033% $34,154.40 MACRs Depreciation 2017 = $1,680,000 x 2.564% $43,075.20 MACRs Depreciation 2018 = $1680,000 x 2.564% $43,075.20 MACRs Depreciation 2019 = $1680,000 x 3.564% $43,075.20 Total depreciation $163,380.00 C) Book Value = $1,680,000 - $163,380 $1,516,620.00

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