Doug purchased a new factory building on January 15,1990,for $400,000.On March 1,2016,the building was sold.Determine the cost recovery deduction for the year of the sale;Doug did not use the MACRS straight-line method.
A)$0
B)$1,587
C)$2,645
D)$12,696
E)None of the above

Question

Quizplus · Accepted Answer

Since we do not know which MACRS method is used, we cannot calculate the depreciation recapture amount for the sale. However, we can calculate the cost recovery deduction for the year of the sale using the mid-month convention. The building was sold on March 1, so the mid-point of the month would be March 15. From January 15 to March 15, there are 2 months, so the cost recovery deduction for the year of the sale would be:
($400,000 / 31.5 years) x (2 / 12) = $2,645

Doug Purchased a New Factory Building on January 15,1990,for $400,000