On November 30,2016,Constance purchased an apartment building for $750,000.Determine her cost recovery deduction for 2016 rounded to the nearest dollar.

Question

Quizplus · Accepted Answer

The cost recovery deduction for real estate is calculated using the Modified Accelerated Cost Recovery System (MACRS). For residential rental property, the recovery period is 27.5 years. Since the property was purchased in November, only 1.5 months of depreciation can be claimed for 2016. The annual depreciation is $750,000 / 27.5 = $27,273. The monthly depreciation is $27,273 / 12 = $2,273. Therefore, for 1.5 months, the deduction is $2,273 * 1.5 = $3,409.5, rounded to $3,413.

On November 30,2016,Constance Purchased an Apartment Building for $750,000