Diane purchased a factory building on April 15,1993,for $5,000,000.She sells the factory building on February 2,2015.Determine the cost recovery deduction for the year of the sale.
A)$16,025
B)$19,838
C)$26,458
D)$158,750
E)None of the above

Question

Quizplus · Accepted Answer

The factory building is nonresidential real property, which is depreciated over 39 years using the straight-line method. The cost recovery deduction for the year of sale is calculated by taking the annual depreciation and prorating it for the months the property was held in the year of sale. The annual depreciation is $5,000,000 / 39 = $128,205.13. Since the building was sold in February, it was held for 1.5 months in 2015. The cost recovery deduction is $128,205.13 * (1.5/12) = $19,838.

Diane Purchased a Factory Building on April 15,1993,for $5,000,000