Rafael bought an apartment building on March 27, 1998, at a cost of $2,000,000 exclusive of the cost allocated to the land). He sells the building on November 3, 2014. What is Rafael's cost recovery deduction on the building for 2014 if he wants to take the maximum deduction allowable on the building?
A) $44,870
B) $63,630
C) $66,660
D) $69,690
E) $72,740

Question

Quizplus · Accepted Answer

The building is nonresidential real property, which is depreciated over 39 years using the straight-line method. Since Rafael sells the building in November, he can take 10.5 months of depreciation for 2014. The annual depreciation is $2,000,000 / 39 = $51,282.05. For 10.5 months, the depreciation is $51,282.05 * (10.5/12) = $44,870.

Rafael Bought an Apartment Building on March 27, 1998, at a Cost