On November 18 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 $1,500,500; $363,000 was allocated to the basis of the land and the remaining $1,137,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

a. Using MACRS, what is Javier's depreciation deduction on the building for Years 1 through 3?
b. What would be the Year 3 depreciation deduction if the building was sold on January 22 of Year 3?
c. Answer the question in part (a), except assume the building was purchased and placed in service on October 13 instead of November 18.
d. Answer the question in part (a), except assume that the building is residential property.
e. What would be the depreciation for 2018, 2019, and 2020 if the property were nonresidential property purchased and placed in service November 18, 2001 (assume the same original basis)?

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PiaDeveau PiaDeveau · Answer 1 · 2021-11-22T06:53:11+01:00

Normal Depreciation and Depreciation expenses as residential property are 2.564% and 3.636%

A. Depreciation expenses for 1st year= [($1,137,500)(0.321%)]

Depreciation expenses for 1st year= $3,651

Depreciation expenses for 2nd year= [($1,137,500)(2.564%)]

Depreciation expenses for 2nd year= $29,166

Depreciation expenses for 3rd year= [($1,137,500)(2.564%)]

Depreciation expenses for 3rd year= $29,166

B. Year 3 Depreciation expenses Up-to January 22 = [22,166][0.5/12]

Year 3 Depreciation expenses Up-to January 22 = $1,215

C. Depreciation expenses for 1st year= [($1,137,500)(0.535%)]

Depreciation expenses for 1st year= $6,086

Depreciation expenses for 2nd year= [($1,137,500)(2.564%)]

Depreciation expenses for 2nd year= $29,166

Depreciation expenses for 3rd year= [($1,137,500)(2.564%)]

Depreciation expenses for 3rd year= $29,166

D. Depreciation expenses for 1st year as residential property = [($1,137,500)(0.455%)]

Depreciation expenses for 1st year as residential property = $5,176

Depreciation expenses for 2nd year as residential property = [($1,137,500)(3.636%)]

Depreciation expenses for 2nd year as residential property = $41,360

Depreciation expenses for 3rd year as residential property = [($1,137,500)(3.636%)]

Depreciation expenses for 3rd year as residential property = $41,360

E. Depreciation expenses for 2017 = [($1,137,500)(0.321%)]

Depreciation expenses for 2017 = $29,166

Depreciation expenses for 2018 = [($1,137,500)(2.564%)]

Depreciation expenses for 2018 = $29,166

Depreciation expenses for 2019 = [($1,137,500)(2.564%)]

Depreciation expenses for 2019 = $29,166

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