Answer and Explanation:
The computation of the MACRS depreciation is shown below:
In this question we assume the hotel building will be treated as a normal building and buildings that contains 39 year assets life
Now before that we need to do following calculations
Total cost paid initially is
= Cost of land + Cost of Hotel
= $200,000 + $800,000
= $1,000,000
Now
For 39 year assets , the depreciation rate is 1.3% in year 1 and 2.6% for all other years
And, also we know that for land no depreciation is calculated as it have unlimited life so we considered only hotel building
Now
MACRS depreciation for Year 1 is
= 0.013 × $800,000
= $10,400
MACRS depreciation for Year 2 is
= 0.026 × $800,000
= $20,800
MACRS depreciation for Year 3 is
= 0.026 × $800,000
= $20,800
So,
Total depreciation for first three years is
= $10,400 + $20,800 + $20,800
= $52,000
And,
MACRS depreciation for Year 4 is
= 0.026 × $800,000
= $20,800
So,
Total depreciation for first four years is
= $10,400 + $20,800 + $20,800 + $20,800
= $72,800
