Simmons LLC purchased an office building and land several years ago for $250,000.The purchase price was allocated as follows: $200,000 to the building and $50,000 to the land.The property was placed in service on October 2.If the property is disposed of on February 27 during the 10ᵗʰ year,calculate Simmons' maximum depreciation in the 10ᵗʰ year.(Use MACRS Table 5 in the text) EXHIBIT 10-6 in the text
A) $641.
B) $909.
C) $5,128.
D) $7,346.
E) None of the choices are correct.

Question

Simmons LLC purchased an office building and land several years ago for $250,000.The purchase price was allocated as follows: $200,000 to the building and $50,000 to the land.The property was placed in service on October 2.If the property is disposed of on February 27 during the 10ᵗʰ year,calculate Simmons' maximum depreciation in the 10ᵗʰ year.(Use MACRS Table 5 in the text)  EXHIBIT 10-6 in the text
A) $641.
B) $909.
C) $5,128.
D) $7,346.
E) None of the choices are correct.

Quizplus · Accepted Answer

The building is depreciated over 39 years using the mid-month convention. In the 10th year, the depreciation is calculated for 1.5 months (February 27 is in the second month, and the mid-month convention applies). Using MACRS Table 5, the depreciation rate for the 10th year is 2.564%. The depreciation for the 10th year is $200,000 * 2.564% * (1.5/12) = $641.

Simmons LLC Purchased an Office Building and Land Several Years