On November 30,2017,Constance purchased an apartment building for $750,000 (assume this is the Depreciable Cost excluding any Land valuation).Determine her cost recovery deduction for 2017 rounded to the nearest dollar.

Question

Quizplus · Accepted Answer

The cost recovery deduction for real estate is based on the Modified Accelerated Cost Recovery System (MACRS). Residential rental property is depreciated over 27.5 years. Since the property was placed in service in November, Constance can claim 1.5 months of depreciation for 2017. The annual depreciation is $750,000 / 27.5 = $27,273. For 1.5 months, it's $27,273 * (1.5/12) = $3,409.125, which rounds to $3,413.

On November 30,2017,Constance Purchased an Apartment Building for $750,000 (Assume