Question

1. Maria, a sole-proprietor, purchased commercial real estate to use in her business on April 24, 2002. She initially purchased the real estate at a cost of $525,000 (initial basis, presume no allocation to land). In 2019, Maria sells the commercial real estate on October 16, 2019. Calculate the depreciation expense for this asset in 2019.

Answer 1

Commercial real estate can be depreciated over 39 year straight line for commercial property or a 27.5 year straight line for residual property as dictated by the current U.s tax code and IRS

So , Maria being Sole propreitor , purchased commercial real estate to use in her business ( commercial )

$ 525000 ( no allocation to land )

now we are asked to find depreciation for the year 2019 as Maria sold the estate

In straight line basis , annual depreciation expense would be 525000/ 39 years

that would be around $ 13, 461.54

Now It  should be allocated based on the period it covered in annual financial year

let say from January to December is Financial year in this scenario

then maria sold it october 16 , 2019 = $ 13,461 .54 ( it covers 289 days in a year )

then Depreciation Expense for 2019 would be $ 10,658.59