Final answer:
Nonresidential real estate purchased since 1987 must be depreciated using the Modified Accelerated Cost Recovery System (MACRS), which is a method that combines straight-line depreciation and declining balance calculations.
Step-by-step explanation:
Nonresidential real estate purchased since 1987 must be depreciated using the Modified Accelerated Cost Recovery System (MACRS). This method is prescribed by the Internal Revenue Service (IRS) for tax purposes and allows for the recovery of the costs of tangible property over a specified life. The system allows for greater depreciation in the early years of an asset's life.
MACRS uses a combination of the straight-line depreciation method and declining balance method, switching to straight-line once it offers a greater deduction. It is important for businesses and individuals dealing with nonresidential real estate to understand and properly apply the MACRS method to calculate their property's depreciation accurately for tax reporting.