What is the first, second, fifth, and last year’s depreciation for a $4,953,000 office building using...

What is the first, second, fifth, and last year’s depreciation for a $4,953,000 office building using the straight-line method and mid-month convention? The office building is placed in service in October. The company’s tax year runs from January to December. The cost of the land is not included in the $4,953,000. These depreciation calculations are to be used for tax purposes

Expert Solution

Solution:

The IRS depreciates residential rental buildings over 27.5 years and retail and other commercial structures over 39 years.

Calculation of annual depreciation

Particulars	Amount($)
Cost	$4,953,000
Salvage value	$0
Depreciable amount	$4,953,000
Life of land	39 Years

Annual depreciation ($4,953,000*39)	$127,000

.

Calculation of depreciation

Year	Months	Calculations	Depreciation
1	2.5	($127,000*2.5/12)	$26,458
2	12	($127,000*12/12)	$127,000
3	12	($127,000*12/12)	$127,000
4	12	($127,000*12/12)	$127,000
5	12	($127,000*12/12)	$127,000
6-38	12	($127,000*12/12)	$127,000
Last year 39	9.5	(($127,000*9.5/12)	$100,542

			$4,953,000.

Note:

The mid month tradition applies just to retail property. Under the mid month tradition, one half month of deterioration is took into consideration the month the benefit is placed in service or discarded and an entire month of devaluation is took into account each extra month of the year that the advantage is in administration.

On the off chance that you utilize the mid month transformation, this likewise implies you should record a half month of devaluation for the most recent month of the advantage's helpful life.

ekkarill92 answered 1 year ago

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