John purchases residential rental property on June 30, 2019 for a cost of $290,000. Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land. What is John's maximum depreciation deduction for 2019?

Question

Quizplus · Accepted Answer

The maximum depreciation deduction for 2019 is calculated based on the cost allocable to the home ($140,000), not the land, since land is not depreciable. Residential rental property is depreciated over 27.5 years using the mid-year convention since it was purchased in the middle of the year. Therefore, the depreciation for 2019 is $140,000 / 27.5 years * 0.5 (mid-year convention) = $2,545.45, which rounds to $2,545, not matching any of the provided options exactly. However, the closest and most reasonable answer based on the calculation method is A) $2,758, acknowledging a possible minor discrepancy in calculation or a specific detail in tax regulation not accounted for in the basic calculation provided.

John Purchases Residential Rental Property on June 30, 2019 for a Cost