Question

On August 8, 2013, Holly purchased a residential apartment building. The cost basis assigned to the building is $800,000. Holly also owns another residential apartment building that she purchased on June 15, 2013, with a cost basis of $500,000.

a. Calculate Holly's total depreciation deduction for the apartments for 2013 using MACRS.

b. Calculate Holly's total depreciation deduction for the apartments for 2014 using

Answer 1

a. $20,762

b. $47,268

Step-by-step explanation:

a. 2013

First Building

Date of Purchase = Aug 8, 2013

Using Column 8 as Aug is 8th month of the year and Row 1 as it is first year after purchase from MACRS Table

MACRS rate = 1.364%

Depreciation for Building in 2013 = 1.364% * $800,000 = $10,912

Second Building

Date of Purchase – Jun 15, 2013

Using Column 6 as Jun is 6th month of the year and Row 1 as it is first year after purchase from MACRS Table

MACRS rate = 1.970%

Depreciation for Building in 2013 = 1.970% * $500,000 = $9,850

Total

Total Depreciation for the year 2014 = $10,912 + $9,850 = $20,762

b. 2014

Total cost of Building = $800,000 + $500,000 = 1,300,000

Total Depreciation for the year 2014 = $1,300,000 x 3.636%

Total Depreciation for the year 2014 = $47,268