Tom Tom LLC purchased a rental house and land during the current year for $162,000. The purchase price was allocated as follows: $106,000 to the building and $56,000 to the land. The property was placed in service on May 22. Calculate Tom Tom's maximum depreciation for this first year. (Use MACRS Table 3.)(Round final answer to the nearest whole number.)

Question

Quizplus · Accepted Answer

The building is depreciated using the MACRS 27.5-year residential rental property table. For the first year, the depreciation rate is 3.636%. Therefore, $106,000 * 3.636% = $3,854.16. Since the property was placed in service in May, the mid-month convention applies, and only 7.5 months of depreciation is allowed, resulting in $3,854.16 * (7.5/12) = $2,409.

Tom Tom LLC Purchased a Rental House and Land During