Question

On April 3rd, Terry purchased and placed in service a building. The building cost $2 million. An appraisal determined that 25% of the total cost was attributed to the value of the land. The bottom floor of the building is leased to a retail business for $32,000. The other floors of the building are rental apartments with an annual rent of $160,000. Determine Terry's cost recovery deduction for 2014.

Answer 1

Answer:

$38,640

Explanation:

25% land - $2,000,000*0.25 = $500,000

75% building - $2,000,000*0.75 = $1,500,000

$160,000 buildings and $32,000 business = residential property

=$1,500,000*0.02576

= $38,640