Dunn Company bought a certified historic building in downtown Lafayette for $75,000. The land was not purchased; it is being leased. The building was originally placed into service in 1918. Dunn spends $100,000 to rehabilitate the building with the intent to develop a microbrewery on the site. The company retained 80% of the external and internal walls and framework. Assume the amount of the historic building rehabilitation credit Dunn can claim is $20,000. What is the basis in the building for depreciation purposes?

Question

Quizplus · Accepted Answer

The basis for depreciation purposes is the original purchase price of the building ($75,000) plus the rehabilitation costs ($100,000), totaling $175,000. However, because the historic building rehabilitation credit of $20,000 (20% of $100,000) reduces the basis, the correct basis for depreciation is $175,000 - $20,000 = $155,000.

Dunn Company Bought a Certified Historic Building in Downtown Lafayette