Question

On April 17 of year 1 Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,533,000; $393,000 was allocated to the basis of the land and the remaining $1,140,000 was allocated to the basis of the building. Use MACRS.

a. Using MACRS, what is Javier’s depreciation deduction on the building for years 1 through 3?

Year	Depreciation Deduction
1
2
3

B. What would be the year 3 depreciation deduction if the building was sold on February 9 of year 3?

c. Answer the question in part (a), except assume the building was purchased and placed in service on February 17 instead of April 17.

Year . Depreciation Deduction

1
2
3

d. Answer the question in part (a), except assume that the building is residential property.

Year . Depreciation Deduction

1
2
3

What would be the depreciation for 2018, 2019, and 2020 if the property were nonresidential property purchased and placed in service April 17, 2001 (assume the same original basis)?

Year . Depreciation Deduction

2018
2019
2020

Answer 1

a)

Year	Method	Recovery Period	Date Placed in Service	Original Basis	Rate	Depreciation
1	SL	39	April 17	$1140000	1.816%	$20702
2				$1140000	2.564%	$29230
3				$1140000	2.564%	$29230

b)

Year	Method	Recovery Period	Date Placed in Service	Original Basis	Rate	Depreciation
1	SL	39	April 17	$1140000	2.564%	$29230

Depreciation = $29230*(1.5/12)

= $3654

c)

Year	Method	Recovery Period	Date Placed in Service	Original Basis	Rate	Depreciation
1	SL	39	Feb. 17	$1140000	2.033%	$23176
2				$1140000	2.564%	$29230
3				$1140000	2.564%	$29230

d)

Year	Method	Recovery Period	Date Placed in Service	Original Basis	Rate	Depreciation
1	SL	27.5	April 17	$1140000	2.576%	$29366
2				$1140000	3.636%	$41450
3				$1140000	3.636%	$41450

e)

Year	Method	Recovery Period	Date Placed in Service	Original Basis	Rate	Depreciation
2018	SL	39	2001	$1140000	2.564%	$29230
2019				$1140000	2.564%	$29230
2020				$1140000	2.564%	$29230