On April 17 of year 1 Javier purchased a building, including the land it was on,...

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Accounting

On April 17 of year 1 Javier purchased a building, including theland it was on, to assemble his new equipment. The total cost ofthe purchase was $1,533,000; $393,000 was allocated to the basis ofthe land and the remaining $1,140,000 was allocated to the basis ofthe building. Use MACRS.
a. Using MACRS, what is Javier’s depreciationdeduction on the building for years 1 through 3?
Year Depreciation Deduction
1
2
3
B. What would be the year 3 depreciation deduction if thebuilding was sold on February 9 of year 3?
c. Answer the question in part (a), exceptassume the building was purchased and placed in service on February17 instead of April 17.
Year . Depreciation Deduction
1
2
3
d. Answer the question in part (a), exceptassume that the building is residential property.
Year . Depreciation Deduction
1
2
3
What would be the depreciation for 2018, 2019, and 2020 if theproperty were nonresidential property purchased and placed inservice April 17, 2001 (assume the same original basis)?
Year . Depreciation Deduction
2018
2019
2020

Answer & Explanation Solved by verified expert

4.4 Ratings (634 Votes)

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

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

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

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

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

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Transcribed Image Text

On April 17 of year 1 Javier purchased a building, including theland it was on, to assemble his new equipment. The total cost ofthe purchase was $1,533,000; $393,000 was allocated to the basis ofthe land and the remaining $1,140,000 was allocated to the basis ofthe building. Use MACRS.a. Using MACRS, what is Javier’s depreciationdeduction on the building for years 1 through 3?YearDepreciation Deduction123B. What would be the year 3 depreciation deduction if thebuilding was sold on February 9 of year 3?c. Answer the question in part (a), exceptassume the building was purchased and placed in service on February17 instead of April 17.Year . Depreciation Deduction123d. Answer the question in part (a), exceptassume that the building is residential property.Year . Depreciation Deduction123What would be the depreciation for 2018, 2019, and 2020 if theproperty were nonresidential property purchased and placed inservice April 17, 2001 (assume the same original basis)?Year . Depreciation Deduction201820192020