LD Partnership, a cash basis taxpayer, purchases land and a building for $200,000 with $150,000 of the cost being allocated to the building.The gross receipts of the partnership are less than $100,000.LD must capitalize the $50,000 paid for the land but can deduct the $150,000 paid for the building in the current tax year.

Question

Quizplus · Accepted Answer

The $150,000 allocated to the building must be capitalized and depreciated over its useful life, not deducted in full in the year of purchase, regardless of the partnership's gross receipts.

LD Partnership, a Cash Basis Taxpayer, Purchases Land and a Building