YumYum Corporation (a calendar-year corporation) moved into a new office building adjacent to its manufacturing plant in 2017. It purchased and placed in service the following assets during 2017: $\begin{array}{ccr}\text {Date Acquired }&\text {Asset Description }&\text { Cost }\\hline
\text { March 4 } & \text { New Office Building } & \$ 850,000 \
\text { March 15 } & \text { New Computer Equipment } & 45,000 \
\text { March 25 } & \text { New Office Furniture } & \$ 25,000 \
\text { August 20 } & \text { Used Machinery } & \$ 120,000 \
\text { December 15 } & \text { New Automobile } & \$ 30,000
\end{array}$ All assets are used 100% for business use. The office building does not include the cost of the land on which it is located that was an additional $300,000. The corporation had $900,000 income from operations before calculating depreciation deductions. If YumYum Corporation made all elections available to maximize its overall depreciation deduction for 2017, what is YumYum's maximum depreciation deduction for the office building in 2017?

Question

Quizplus · Accepted Answer

The office building is a nonresidential real property with a 39-year recovery period under the Modified Accelerated Cost Recovery System (MACRS). The mid-month convention applies, and the depreciation rate for the first year is approximately 2.033%. Therefore, the maximum depreciation deduction for the office building is $850,000 * 2.033% = $17,281.

YumYum Corporation (A Calendar-Year Corporation) Moved into a New Office