Mary Wilson purchases a factory building on September 29, 2018, for $4,000,000 (exclusive of the amount allocated to the land). It elects the alternative depreciation system (ADS). What is the 2018 depreciation deduction?
A)$29,167
B)$30,000
C)$42,424
D)$70,833
E)$100,000

Question

Quizplus · Accepted Answer

Under the alternative depreciation system (ADS), a factory building is depreciated over a 40-year straight-line period. Since the building was purchased on September 29, 2018, Mary Wilson can only claim depreciation for the part of the year that she owned the building. For 2018, this amounts to 3 months (October, November, December). The annual depreciation for the building is $4,000,000 / 40 = $100,000. For 3 months, the depreciation would be $100,000 * (3/12) = $25,000. However, the correct answer is not listed directly, indicating a possible mistake in the calculation or the choices provided. Given the options, $29,167 (A) is the closest to any reasonable calculation error, but it should be noted that this does not align with the standard calculation method described.

Mary Wilson Purchases a Factory Building on September 29, 2018