Question

Last year, a corporation purchased an office building for $220,000, of which $30,000 was allocated to the land on which the building was locateD. The building's salvage value was estimated to be $50,000. The corporation's current year depreciation deduction for the building is:

Answer 1

Answer:

$4872

Explanation:

Given: Purchase price of an office building= $220000.

           Out of cost building, $30000 was allocated to the land.

Remember, As per current US Tax code, commercial building can be depreciated over 39-year straight-line for commercial property.

Now, calculating the current year depreciation deduction.

We know, land is not depreciable.

∴ Cost of building= $Purchase\ price\ of\ building - cost\ of\ land$

⇒ Cost of building= $\ 220000 - \ 30000$

∴ Cost of building= $\ 190000$

Next calculating depreciation using straight line method ignoring salvage value.

Depreciation deduction= $\frac{\ 190000}{39}$

∴ Depreciation deduction= $\ 4872$

Hence, The corporation's current year depreciation deduction for the building is $4872