John purchases residential rental property on June 30, 2018 for a cost of $290,000.Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land.What is John's maximum depreciation deduction for 2018?

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Quizplus · Accepted Answer

Residential rental property is depreciated over 27.5 years using the straight-line method. The cost of the land is not depreciable. For 2018, John can depreciate the home for half a year (from June 30 to December 31). The annual depreciation is $140,000 / 27.5 = $5,090.91. For half a year, the depreciation is $5,090.91 / 2 = $2,545.45, which rounds to $2,758 when considering the mid-month convention for the first year.

John Purchases Residential Rental Property on June 30, 2018 for a Cost