Carl purchased an apartment complex for $1,100,000 million on March 17 of year 1
ID: 2552915 • Letter: C
Question
Carl purchased an apartment complex for $1,100,000 million on March 17 of year 1. $300,000 of the purchase price was attributable to the land the complex sits on. He also installed new furniture into half of the units at a cost of $60,000. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)
a. What is Carl's allowable depreciation expense for his real property for years 1 and 2?
b. What is Carl's allowable depreciation expense for year 3 if the real property is sold on January 2 of year 3? (Do not round intermediate computations.)
Explanation / Answer
1.Carl's allowable depreciation expense for his real property for years 1 and 2
Year
Method
Recovery Period
Date Placed
Basis
Rate (%)
Depreciation
1
SL
27.5
March 17
$ 800000
2.879
$ 23,032
2
SL
$ 800000
3.636
$ 29,088
Depreciation Year 1 = $ 23,032
Depreciation Year 2 = $ 29,088
2.Carl's allowable depreciation expense for year 3 if the real property is sold on January 2 of year 3
Year
Method
Recovery Period
Date Placed
Basis
Rate (%)
Depreciation
3
SL
27.5
March 17
$ 800000
3.636
$ 29,088
Partial Year***
x..50/12
$ 1212
***mid- month convention applies to real property in year of acquisition and year of disposition
Allowable depreciation expense = $ 1212
Year
Method
Recovery Period
Date Placed
Basis
Rate (%)
Depreciation
1
SL
27.5
March 17
$ 800000
2.879
$ 23,032
2
SL
$ 800000
3.636
$ 29,088