which of the following statements about residential rental property are TRUE? The property may be depreciated...

which of the following statements about residential rental property are TRUE? The property may be depreciated using the ___________

a. ADS for a period of 30 years only by electing to in the first year the property is placed into service

b. General Depreciation System for the period of 30 years

c. GDS for a period of 40 years

Solutions

Expert Solution

1. Depreciation gets initiated as soon as the property gets placed into the service or gets available to use as a rental source of income.

2. In general, we have to use GDS (General Depreciation System) to depreciate most of the properties placed in service.

3. ADS (Alternate Depreciation System) is only used in following 4 cases:

a) Property has a tax-exempt use.

b) Property is used primarliy for farming activities.

c) Property has been financed by tax- exempt bonds.

d) Property has % or less of qualified business use.

4. In question under consideration, no such characteristics of ADS are visible, therefore, we will apply GDS to depreciate the residential rental property. (Option A is incorrect)

5. The common time frame for depreciating residential rental property is 27.5 years.

So, the correct answer is Option B (rounded off to 30 years). Therefore, the answer cannot be GDS over 40 years (Option C is incorrect)

6. Conclusion: The residential rental property is depreciated using GDS (General Depreciation System) for 30 years period- Option B is correct.

jeff jeffy answered 1 year ago

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