Tom Tom LLC purchased a rental house and land during the current year for $174,000. The purchase price was allocated as follows: $112,000 to the building and $62,000 to the land. The property was placed in service on May 22. Calculate Tom Tom's maximum depreciation for this first year. (Use MACRS Table 3.) (Round final answer to the nearest whole number.)

Question

Quizplus · Accepted Answer

The building is depreciated over 27.5 years using the MACRS residential rental property table. For the first year, the applicable percentage is 3.182%. Therefore, the depreciation is $112,000 * 3.182% = $3,564. However, since the property was placed in service in May, the first-year depreciation is prorated to 7.5/12 months, resulting in $3,564 * (7.5/12) = $2,546.

Tom Tom LLC Purchased a Rental House and Land During