Question

On August 2, 2018, Wendy purchased a new office building for $3,800,000. On October 1, 2018, she began to rent out office space in the building. On July 15, 2022, Wendy sold the office building. If required, round your answers to the nearest dollar.

a. What MACRS convention applies to the new office building?
b. What is the life of the asset for MACRS?
c. Wendy's cost recovery deduction for 2018 is $_________ and for 2022 is ____________$ .

Answer 1

a. Mild Month MACRS convention applies to the new office building

b. The life of the asset under MACRS is 39 years

c. The cost recovery deduction for 2018 is $20,330

The cost recovery deduction for 2022 is $52,776

Step-by-step explanation:

a. According to the given data Mild Month MACRS convention is applicable here because real property is placed in service in the middle of the month in which acquired.

b. The life of the asset under MACRS is 39 years

c. cost recovery deduction for 2018= $3,800,000*0.535%

cost recovery deduction for 2018=$20,330

cost recovery deduction for 2022= $3,800,000*2.564%

cost recovery deduction for 2022= $52,776