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Mike Brady purchased an apartment building on February 12, 2020, for a total of $3 million...

Mike Brady purchased an apartment building on February 12, 2020, for a total of $3 million of which $800,000 was the value of the land on which the apartment building was located.

In addition, Mike purchased 7-year class new business equipment for $19,400 on October 11, 2020. He elects not to immediately expense the equipment under §179 and elects not to take the additional first-year depreciation.

Mike purchased no other business assets during 2020.

Determine Mike’s depreciation on the apartment building for 2020.

b. Determine Mike’s depreciation on the equipment for 2020.

c. If Mike sells the apartment building on October 1, 2027, how much depreciation deduction will Mike take for the apartment building for 2027?

d. If Mike sells the equipment on December 28, 2021, how much depreciation deduction will Mike take for the equipment for 2021?

Expert Solution

a) caluculation of mike's apartment building depreceation.

apartment building depreceation rate as per INCOME TAX ACT is 10%

$3000000 * 322/365 *10% = $264657 for the year 2020

b) mike's depreceation on the equipment

business equipment depreceation rate is 15%

$19400 *81/365*15% = $ 645.7 for the year 2020

c) total depreceation if mike sells the apartment in 2027

depreceation for 2021 to 2026 that means 6 years

for year 2021 = $3000000 - $264657 = 2735343 *10%= 273534

for 2022 = $2735343 - $ 273534 = 2461809 *10% = $246181

for 2023 = 2461809 -246181 = 2215628 *10% =221563

for 2024 = 2215628 -221563 = 1994065 *10% =199406

foe 2025 = 1994065 - 199406 =1794659 *10% =179466

for 2026 = 1794659 -179466 =1585193*10% =158519

for 2027 = 1585193- 158519 =1426674 *10%*273/365 = 106707

depreceation for the year 2027 will be $106707

total depreceation from the date of sale to date of purchase = $ 1650033

d) if mike sells equipment on december 28 , 2021

depreceation for the year 2021 will be

$19400 - $645.7 = $18754.3 * 15% *363/365 = $2797.7

ekkarill92 answered 1 year ago

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