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 10^th year,calculate Simmons' maximum depreciation in the 10^th year.(Use MACRS Table 5) EXHIBIT 2-6 A) $641. B) $909. C) $5,128. D) $7,346. E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The building is nonresidential real property with a 39-year recovery period under MACRS. In the 10th year, the property is disposed of in February, so only a partial year's depreciation is allowed. Using the MACRS Table 5 for the 39-year property, the depreciation for the 10th year is calculated as $200,000 * 2.564% = $5,128 for a full year. Since the property is disposed of in February, only 1.5 months of depreciation is allowed, which is $5,128 * (1.5/12) = $641.

Simmons LLC Purchased an Office Building and Land Several Years