Question

LCD Corporation purchased residential real property for $398000 (exclusive of land cost) and placed it in service on August 6, 2022. Compute MACRS depreciation on the property for 2023.

[For your answer, please use whole number (no need to round) and ignore the dollar sign and the comma.]

Answer 1

To calculate the MACRS depreciation on residential real property for 2023, multiply the depreciable value of $398,000 by the year 2 MACRS percentage for residential rental property, which is 3.636%. The depreciation expense for 2023 comes out to $14,479.

Step-by-step explanation:

The subject of the question is the calculation of MACRS depreciation on residential real property for the year following its placement in service. Since the property is residential real estate, it will be depreciated under MACRS using the 27.5-year straight-line method. For the second year of service, 2023, the depreciation expense can be calculated by taking the property's depreciable basis ($398,000) and multiplying it by the standard MACRS percentage for the second year, which is 3.636% for residential rental property. Therefore, the depreciation expense for 2023 would be calculated as follows:

• Depreciable value of the property: $398,000
• MACRS percentage for year 2: 3.636%
• Depreciation expense: $398,000 * 0.03636 = $14,479

Therefore, the MACRS depreciation for the property for the year 2023 is $14,479.