Question

Poplock LLC purchased a warehouse and land during the current year for $350,000. The purchase price was allocated as follows: $275,000 to the building and $75,000 to the land. The property was placed in service on August 12. Calculate Poplock's maximum depreciation for this first year. (Use MACRS Table 5) (Round final answer to the nearest whole number.)

a. $3,371.
b. $2,648.
c. $3,751.
d. $4,774.
e. None of the choices are correct.

Answer 1

Poplock LLC can calculate its maximum depreciation for the first year using the Modified Accelerated Cost Recovery System (MACRS) and the Half-Year Convention. The maximum depreciation would be $10,000.

Step-by-step explanation:

Poplock LLC can calculate its maximum depreciation using the Modified Accelerated Cost Recovery System (MACRS). According to the given information, the purchase price of the building is $275,000, and it was placed in service on August 12. Since the property was placed in service during the year, we use the 'Half-Year Convention' to calculate depreciation.

Using MACRS Table 5 (27.5-year property), the depreciation percentage for the first year is 3.6364%. Therefore, the maximum depreciation for Poplock LLC for the first year would be $275,000 x 3.6364% = $10,000 (nearest whole number).