Mary purchased an apartment building on March 12, 2017, for a total of $3 millio
ID: 2546701 • Letter: M
Question
Mary purchased an apartment building on March 12, 2017, for a total of $3 million of which $600,000 was the value of the land on which the apartment building was located.
Also, Mary purchased 7-year class new business equipment for $45,000 on November 11, 2017. She elects not to immediately expense the equipment under §179 and elects not to take the additional first-year depreciation.
Mary purchased no other business assets during 2017.
Determine Mary’s depreciation on the apartment building for 2017.
b. Determine Mary’s depreciation on the equipment for 2017.
c. If Mary sells the apartment building on April 29, 2020, how much depreciation deduction will Mary take for the apartment building for 2020?
d. If Mary sells the equipment on December 20, 2018, how much depreciation deduction will Mary take for the equipment for 2018?
Explanation / Answer
A) Depreciation on the apartment building for 2017
Assumption: LIfe of Apartment is 20 Years & Company following Starightline Method of Depreciation.
Value of Building= $3 Million - 0.6 Million = $2.4 Million
Depreciation = 2.4/20*295/365= $96986
Depreciation Period= 12th March 2017 till 31st December 2017= 295 Days
B) Depreciation on the equipment for 2017.
Depreciation Period = 11th November to 31st Deecember= 51days
45000/7*51/365= $898
C) Depreciation on Apartment Building for 2020
Depreciation period = 1st Jan 2020 to 29th April 2020= 120 Days
Closing Book Value for 2017
Depreciation = 2.4/20*295/365= $96986
2400000-96986= $2303014/230.5 months*12= $119896 Depreciation for 2018
Closing Value for 2018= 2303014-119896= $2183118
Depreciation for 2019
2183118/218.5 months*12 Months= $119896
Closing Value for 2019= 2183118-119896= $2063222
Depreciation for 2020
2063222/206.5 months* 4 months= $39966
D) Depreciation for 2018 for Equipment
Depreciation Period = 11th November to 31st Deecember= 51days
45000/7*51/365= $898 2017 Depreciation
Closing Value for 2017
45000-898= $44102
Depreciation for 2018
44102/82 months *12 months/365*355 days= $6277