Diane purchased a factory building on November 15,1993,for $5,000,000.She sells the factory building on February 2,2011.Determine the cost recovery deduction for the year of the sale.

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The factory building is nonresidential real property, which is depreciated over 39 years using the straight-line method. Since the building was sold in February, the cost recovery deduction for the year of sale is calculated using the mid-month convention. The deduction is for 1.5 months (January and half of February) of the annual depreciation. Annual depreciation = $5,000,000 / 39 = $128,205.13. Monthly depreciation = $128,205.13 / 12 = $10,684. Annual depreciation for 1.5 months = $10,684 * 1.5 = $16,025.

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