1- Steve Corp bought a $600,000 apartment building in June of 2015. Of the purch
ID: 2563182 • Letter: 1
Question
1-
Steve Corp bought a $600,000 apartment building in June of 2015. Of the purchase price, $104,950 is allocated to the value of the land. What is the maximum amount of depreciation that the company can claim in 2016 (year 2) for the building?
a.$18,000
b.$25,000 under the election to expense business property
c.$9,752
d.$21,816
e.You cannot depreciate property costing over $500,000
2-
Jenny constructed a building for use as a residential rental property. The cost of the building was $82,488, and it was placed in service on August 1, 1992. The building has a 27.5-year MACRS life. What is the amount of depreciation on the building for 2016 for tax purposes?
a.$6,000
b.$6,547
c.$2,250
d.$3,000
e.None of these choices are correct.
Explanation / Answer
Question 1:The depreciation method usually followed for Apartment buildings is Straight line method. However the life should be 27.50 years as allowed by IRS.
(cost-salvage)/ total useful life = (4,95,050-0)/27.50
= $ 18,000
So, answer to (1) is (a) =$18,000
Question 2:
Usually the method used to depreciate the residental rental property is straight line method.
= ($82,488-0)/ 27.50
= $ 3,000
Hence depreciation for 2016 is $3,000.
Answer to (2) is (d) = $3,000
Hope it helps,
Thank you.
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