Doug purchased a new factory building on January 15,1988,for $400,000.On March 1,2013,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.
A)$0.
B)$1,587.
C)$2,645.
D)$12,696.
E)None of the above.

Question

Quizplus · Accepted Answer

The building was purchased in 1988, so it would be depreciated using the ACRS method applicable at that time. For non-residential real property, the recovery period was 31.5 years. Since the building was sold on March 1, 2013, Doug would take a partial year depreciation for 2013. The cost recovery deduction is calculated as $400,000 / 31.5 years = $12,698.41 per year. For 2013, the deduction would be for 2 months (January and February), which is approximately $2,645.

Doug Purchased a New Factory Building on January 15,1988,for $400,000