Question

"You purchased a commercial building and lot for $720,000 on December 15th of 2013. The lot itself was valued at $100,000 when purchased. You sold the lot and building on June 15th of 2018. Use MACRS depreciation and note this property is non-residential real property (39 year life). What is your allowable taxable depreciation amount for year 2013?"

Answer 1

Cost of commercial building	$                            620,000.00
Cost of lot	$                            100,000.00
Total cost of commercial building and Lot	$                            720,000.00
Useful life of the commercial building =	39.00
MACRS depreciation rate = 100%/39	0.03
As the commercial building is sold in June 15, 2018, and as mid month convention is used for the commercial property deprecition rate to be applied for 2018= 2.564% / 12 x 6.5 months	0.01
Depreciation for the year 2018 is = $620,000 x 1.39%	$                                8,618.00
Parking lot is considered as land improvement and so would be having a 20 year life
Depreciation rate using straight-line depreciation method =100%/20	0.05
Following the mid-month convention, depreciation for 2018 = 100000 x 5%/12x *6.5 months	$                                2,708.33
Total allowable tax depreciation amount for year 2018 = (8618 + $2,708.33)	$ 11,326.33