Doug purchased a new factory building on January 15, 1989, for $400,000. On March 1, 2014, the building was sold. Determine the cost recovery deduction for the year of the sale assuming he did not use the MACRS straight- line method.

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Quizplus · Accepted Answer

The building was purchased in 1989, so it would be depreciated under the ACRS system, which uses a 31.5-year recovery period for nonresidential real property. By 2014, the building would have been fully depreciated, so the cost recovery deduction for the year of sale would be based on the partial year convention. The deduction for the year of sale would be calculated as a portion of the annual depreciation amount for the remaining months in the year of sale.

Doug Purchased a New Factory Building on January 15, 1989