Question

g Mr. Clark owns a property he bought for $1,000,000. The land was valued at $220,000 and the structure was valued at $780,000. What is the adjusted cost basis of the property after eight years of ownership using a 39 year depreciable life

Answer 1

$820,000

Step-by-step explanation:

Land is not depreciable, so you must always report it at historical cost value.

You can depreciate the building, the depreciation expense per year = $780,000 / 39 years = $20,000

accumulated depreciation after 8 years = 8 x $20,000 = $160,000

cost basis of the property = $220,000 + ($780,000 - $180,000) = $220,000 + $600,000 = $820,000