On May 30, 2014, Jane signed a 20-year lease on a factory building to use for her business. The lease begins on June 1, 2014. In August 2014, Jane paid $300,000 for leasehold improvements to the building. Determine Jane's total deduction with respect to the leasehold improvements for 2014.

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Quizplus · Accepted Answer

Leasehold improvements are typically depreciated over 15 years using the straight-line method. For 2014, Jane can deduct the depreciation for the period from August to December, which is 5 months. The annual depreciation is $20,000 ($300,000 / 15 years), so for 5 months, it is $2,889 ($20,000 * 5/12).

On May 30, 2014, Jane Signed a 20-Year Lease on a Factory