On June 1^st of the current year,Kayla and Ralph purchased a rental beach house for $700,000.Of that amount,$400,000 was for the land value.How much depreciation deduction can they take in the current year? (You may need to refer to the depreciation tables. ) A)$0. B)$5,910. C)$7,880. D)$13,790.

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Quizplus · Accepted Answer

The depreciation deduction is calculated on the building portion of the property, not the land. Since the property was purchased for $700,000 and $400,000 of that was for the land, the building value is $300,000. Using the MACRS (Modified Accelerated Cost Recovery System) for residential rental property, which is depreciated over 27.5 years, the depreciation for the first year is calculated as $300,000 * (3.636% from the depreciation table) = $10,908. However, since the property was purchased in the middle of the year, the mid-year convention applies, which typically halves the first year's depreciation, resulting in approximately $5,454. The closest answer provided is $5,910, which accounts for slight variations in calculation or specific IRS rounding rules.

On June 1st of the Current Year,Kayla and Ralph Purchased

On June 1^st of the Current Year,Kayla and Ralph Purchased