Final Answer:
The maximum amount of depreciation that can be claimed for the building is $123,000.
Step-by-step explanation:
Depreciation is a tax deduction that allows the cost of a tangible asset, such as an apartment building, to be spread out over its useful life. The depreciation taken on the building, amounting to $123,000, represents the total depreciation claimed over the years of ownership. When the building is sold for a gain of $34,000, it doesn't impact the previously claimed depreciation. Depreciation is a non-cash expense, and the gain on the sale is a separate accounting entry. Therefore, the maximum amount of depreciation that can be claimed remains the original $123,000.
In mathematical terms, depreciation is calculated by dividing the cost of the asset by its useful life. Once this annual depreciation is determined, it accumulates over the years. In this case, the $123,000 already claimed represents the total accumulated depreciation. The gain on the sale doesn't change the historical depreciation amount, as it's a result of market conditions and the property's appreciation. Hence, the correct answer is $123,000, and it's not affected by the gain on the sale, making option 1 the accurate choice.
In summary, the total depreciation claimed on the building remains at $123,000, irrespective of the gain on the sale. This is because depreciation is a separate accounting entry, and the gain represents the property's appreciation in the market, not a reversal of claimed depreciation. Therefore, the maximum amount of depreciation that can be claimed for the building is $123,000.