Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2019: $\begin{array}{lcr}
\underline{\text {Date Acquired}}&
\underline{\text {Asset Description}}&
\underline{\text {Cost}}\
\text { February 18}& \text { Warehouse Building } & \$ 2,450,000 \
\text { June 2 } & \text { Automobile } & 30,000 \
\text { August } 18& \text { Computer Equipment } & 220,000 \
\text { September } 20 & \text { Machinery } & 1,050,000 \
\text { December } 15& \text { Office Equipment } & 885,000
\end{array}$
All assets are used 100% for business use.The warehouse building does not include the cost of the land on which it is located which was an additional $1,000,000.The corporation has $3,000,000 income from operations before calculating depreciation deductions.Sanjuro Corporation made whatever elections were necessary to maximize its overall depreciation deduction for 2019.What was Sanjuro Corporation's cost recovery deduction for the warehouse in 2019?

Question

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2019: $\begin{array}{lcr}
\underline{\text {Date Acquired}}&
\underline{\text {Asset Description}}&
\underline{\text {Cost}}\
\text { February 18}& \text { Warehouse Building } & \$ 2,450,000 \
 \text { June 2 }  & \text { Automobile } & 30,000 \
\text { August } 18& \text { Computer Equipment } & 220,000 \
\text { September } 20  & \text { Machinery } & 1,050,000 \
\text { December } 15& \text { Office Equipment } & 885,000
\end{array}$
 All assets are used 100% for business use.The warehouse building does not include the cost of the land on which it is located which was an additional $1,000,000.The corporation has $3,000,000 income from operations before calculating depreciation deductions.Sanjuro Corporation made whatever elections were necessary to maximize its overall depreciation deduction for 2019.What was Sanjuro Corporation's cost recovery deduction for the warehouse in 2019?

Quizplus · Accepted Answer

The cost recovery deduction for the warehouse, which is a non-residential real property under MACRS, is calculated using a straight-line method over a 39-year recovery period. Since the property was placed in service in 2019, only a half-year's depreciation is allowed for the first year. The calculation is $\$2,450,000 / 39 years * 0.5 = \$31,410.26$. However, the correct answer is A) $55,052, which suggests that there might be a specific provision or election made by the corporation that affects the standard depreciation calculation, such as a special depreciation allowance or a mistake in the calculation provided. Without additional specific tax provisions or elections applicable in 2019 that would increase the depreciation deduction for the warehouse beyond the standard MACRS calculation, the standard calculation would apply, indicating a potential error in the initial explanation.

Sanjuro Corporation (A Calendar-Year Corporation) Purchased and Placed in Service