Lindale Rentals places an apartment building in service on November 22,2016.The building's depreciable basis is $3,300,000.What is Lindale Homes' 2016 depreciation deduction on the property?

Question

Quizplus · Accepted Answer

According to IRS rules, the depreciation deduction for a residential rental property is calculated using the straight-line method over 27.5 years, which means the annual depreciation deduction is $3,300,000 / 27.5 = $120,000. However, since the property was placed in service on November 22, 2016, Lindale Rentals is only eligible to claim depreciation for the portion of the year the property was in service.

The calculation for the 2016 depreciation deduction would be as follows:

Number of days the property was in service in 2016 = 40 (from November 22 to December 31)
Depreciation deduction for 2016 = ($120,000 / 365) x 40 = $13,150

Therefore, the best choice is B, $15,015, which is the closest answer option to the calculated value of $13,150.

Lindale Rentals Places an Apartment Building in Service on November