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ABC purchased an apt building on july 2011 for $6m.$700,000 of these purchase price was allocated to land.calculate cost recovery deduction for year 1

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Land is not depreciable so the cost redovery deduction would be limited to the apt building in this example.

$6m - $.7m = $5.3m

$5.3m is the depreciable asset amount.

Simply divide the cost of the asset by the useful lifespan of the asset. We'll just use 10 years for example purposes.

$5.3m / 10 yrs = $530k

That is the first year deduction.

 

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