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8 February, 06:21

On August 8, 2013, Holly purchased a residential apartment building. The cost basis assigned to the building is $800,000. Holly also owns another residential apartment building that she purchased on June 15, 2013, with a cost basis of $500,000.

a. Calculate Holly's total depreciation deduction for the apartments for 2013 using MACRS.

b. Calculate Holly's total depreciation deduction for the apartments for 2014 using

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Answers (1)
  1. 8 February, 06:35
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    a. $20,762

    b. $47,268

    Explanation:

    a. 2013

    First Building

    Date of Purchase = Aug 8, 2013

    Using Column 8 as Aug is 8th month of the year and Row 1 as it is first year after purchase from MACRS Table

    MACRS rate = 1.364%

    Depreciation for Building in 2013 = 1.364% * $800,000 = $10,912

    Second Building

    Date of Purchase - Jun 15, 2013

    Using Column 6 as Jun is 6th month of the year and Row 1 as it is first year after purchase from MACRS Table

    MACRS rate = 1.970%

    Depreciation for Building in 2013 = 1.970% * $500,000 = $9,850

    Total

    Total Depreciation for the year 2014 = $10,912 + $9,850 = $20,762

    b. 2014

    Total cost of Building = $800,000 + $500,000 = 1,300,000

    Total Depreciation for the year 2014 = $1,300,000 x 3.636%

    Total Depreciation for the year 2014 = $47,268
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