Answer:
total depreciation year 1 = $71,358
total depreciation year 2 = $80,358
Explanation:
Land cannot be depreciated, therefore Carl can only depreciate the building's cost = $2,600,000 - $1,050,000 = $1,550,000
Rental property can be depreciated at a fixed rate of 3.636% per year during 27.5 years. Depreciation per year for the building = $56,358
Furniture on rental property can be depreciated on a 5 year basis using a MACRS table and half year convention:
depreciation year 1 = 20% x $75,000 = $15,000
depreciation year 2 = 32% x $75,000 = $24,000
total depreciation year 1 = $56,358 + $15,000 = $71,358
total depreciation year 2 = $56,358 + $24,000 = $80,358
