On May 30, 2017, Jane purchased a factory building to use for her business. In August 2018, Jane paid $300,000 for improvements to the building. Determine Jane's total deduction with respect to the building improvements for 2018.
A) $2,889
B) $4,173
C) $4,815
D) $25,000
E) None of the above

Question

Quizplus · Accepted Answer

The correct answer is A. $2,889. The total deduction for building improvements is calculated as the depreciation expense for the year. The depreciation expense is calculated as the cost of the improvements divided by the useful life of the improvements. The useful life of building improvements is 39 years. Therefore, the depreciation expense for the year is $300,000 / 39 = $7,692. The total deduction for building improvements is $7,692.

On May 30, 2017, Jane Purchased a Factory Building to Use