Question

Steve Corp bought a $600,000 apartment building in June of 2014. Of the purchase price, $104,950 is allocated to the value of the land. What is the maximum amount of depreciation that the company can claim in 2015 (year 2) for the building?

Answer 1

$18,000

Step-by-step explanation:

According to the Internal revenue service, the useful life of the rental property would be 27.50 years.

The computation of the maximum amount of depreciation is shown below:

= (Purchase cost of building - allocated value of land - salvage value) ÷ useful life

= ($600,000 - $104,950 - $0) ÷ 27.50 years

= $495,050 ÷ 27.50 years

= $18,000