Doug purchased a new factory building on January 15,1987,for $4,000,000.On March 1,2010,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)$15,870.
C)$26,450.
D)$126,960.
E)None of the above.

Question

Quizplus · Accepted Answer

The building was purchased in 1987, which means it was subject to the ACRS depreciation system. Under ACRS, nonresidential real property placed in service after 1986 and before 1994 is depreciated over 31.5 years. For the year of sale, depreciation is prorated based on the number of months the property was held. Since the building was sold in March, it was held for 2 months in 2010. The annual depreciation would be $4,000,000 / 31.5 = $126,984.13. Prorating for 2 months: ($126,984.13 / 12) * 2 = $21,164.02. However, the closest option is $26,450, which suggests a calculation or rounding adjustment.

Doug Purchased a New Factory Building on January 15,1987,for $4,000,000