Question

4> In January 2001, Irene Baldus purchased a warehouse (nonresidential real property) in La Porte, Indiana, for $200,000. Using the Business Math Handbook, what will the allowable depreciation be each year?

Answer 1

According to the MARCS system, the class of nonresidential real propery comes under the depreciation period of 39 years. First year's depreciation would vary as initially, the method to be followed is WDV. however, in the later years, straight line method of depreciation would be followed.

Nonresidential Property--39 Years

Month                     Year in Service

Placed        1                 2-39                40

1    2.461%    2.564%           0.107%

2            2.247%          2.564%           0.321%

3            2.033%         2.564%            0.535%

4           1.819%    2.564%           0.749%

5           1.605%          2.564% 0.963%

6           1.391%          2.564%           1.177%

7           1.177%          2.564% 1.391%

8           0.963%          2.564%           1.605%

9           0.749%         2.564%    1.819%

10         0.535%         2.564%             2.033%

11         0.321%         2.564%             2.247%

12         0.107%         2.564%    2.461%

Since the property is placed in January, the rate of depreciation for the first year would be 2.461%.

Depreciaton for first year = $200000 * 2.461%

                                        = $4922

Depreciation for further years = $200000 * 2.564%

                                        = $ 5128