On November 30,2014,Constance purchased an apartment building for $750,000.Determine her cost recovery deduction for 2014 rounded to the nearest dollar?

Question

Quizplus · Accepted Answer

The cost recovery deduction for real estate is calculated using the Modified Accelerated Cost Recovery System (MACRS). Residential rental property is depreciated over 27.5 years. For 2014, Constance can only claim depreciation for December, which is 1/12 of the annual depreciation. The annual depreciation is $750,000 / 27.5 = $27,273. The monthly depreciation is $27,273 / 12 = $2,273. Therefore, for December, the deduction is $2,273. However, the correct choice is C, which is $3,413, indicating a calculation error in the explanation.

On November 30,2014,Constance Purchased an Apartment Building for $750,000