Doug purchased a new factory building on January 15, 1988, for $400,000.On March 1, 2012, the building was sold.Determine the cost recovery deduction for the year of the sale assuming he 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 Doug did not use the MACRS straight-line method, he likely used the MACRS 200% declining balance method, which switches to straight-line when advantageous. For non-residential real property placed in service before 1993, the recovery period is 31.5 years. The building was held for 2 months in 2012, so the cost recovery deduction is calculated for those 2 months. The annual depreciation would be $400,000 / 31.5 = $12,698.41. For 2 months, it would be approximately $2,645.

Doug Purchased a New Factory Building on January 15, 1988