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:
A) $641
B) $909
C) $5,128
D) $7,346
E) None of these

Question

Quizplus · Accepted Answer

The building is depreciated over 39 years using the straight-line method. For the 10th year, the depreciation is calculated for 1.5 months (January and February) since the property is disposed of in February. The annual depreciation is $200,000 / 39 = $5,128.21. For 1.5 months, it is $5,128.21 * 1.5/12 = $641.03, rounded to $641.

Simmons LLC Purchased an Office Building and Land Several Years