Question

tax question. complete form 8582 and Schedule E.

Rental Property The Heavhos own and rent a two-story commercial office building at 27 Snarkland Street, Sellville, Missouri 63002. They acquired the property on March 15, 2004 for $450,000 (excluding the cost of land), and have made no improvements to the property since then (other than routine maintenance). The office building is not used for personal purposes by any member of the Heavho family, and Mr. Heavho actively participates in the operation and rental of the property, and devotes more than 850 hours per year to this rental activity (including making most of the repairs, cleaning and maintenance). No contractors were paid with respect to this property, and no Forms 1099 need to be filed by the Heavhos. The following 2018 financial information relates to the rental property and was supplied by Mr. Heavho; however, Mr. Heavho relies on his tax accountant (that means YOU) for the depreciation number:

Answer 1

You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. According to IRS Pub. 946 pp.29 - 30, The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). You can use either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. According to IRS Pub. 946 p.36, we can use following conventions. The mid-month convention: Under this convention, you treat all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of The mid-quarter convention: Under this convention, you treat all property placed in service or disposed of during any quarter of the tax year as placed in service or disposed of at the midpoint of that quarter. This means that 112 months of depreciation is allowed for the quarter the property is placed in service or disposed of The half-year convention: Under this convention, you treat all property placed in service or disposed of during a tax year as placed in service or disposed of at the midpoint of the year. This means that a one- half year of depreciation is allowed for the year the property is placed in service or disposed of I have used half year convention for my calculation.

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Value Depreciation 39 450,000.00 5,769.23 38.5 444,230.77 11,538.46 37.5 432,692.31 11,538.46 36.5 421,153.85 11,538.46 35.5 409,615.39 11,538.46 34.5 398,076.93 11,538.46 33.5 386,538.47 11,538.46 32.5 375,000.01 11,538.46 31.5 363,461.55 11,538.46 30.5 351,923.091 11,538.46 29.5 340,384.63 11,538.46 28.5 328,846.17 11,538.46 27.5 317,307.71 11,538.46 26.5 305,769.25 11,538.46 25.5 294,230.79 11,538.46 24.5 282,692.33 11,538.46 23.5 271,153.87 11,538.46 22.5 259,615.41 11,538.46 21.5 248,076.95 11,538.46 20.5 236,538.49 11,538.46 Year 2024 2025 2026 2027 2028 2029 20301 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 Value Depreciation 19.5 225,000.03 11,538.46 18.5 213,461.57 11,538.46 17.5 201,923.11 11,538.46 16.5 190,384.65 11,538.46 15.5 178,846.19 L 11,538.46 14.5 167,307.73 11,538.46 13.5 155,769.27) 11,538.46 12.5 144,230.81 11,538.46 11.5 132,692.35 11,538.47 10.5 121,153.88 11,538.46 9.5 109,615.42 11,538.47 8.5 98,076.95 11,538.46 7.5 86,538.49 11,538.47 6.5 75,000.02 11,538.46 5.5 63,461.56 11,538.47 4.5 51,923.09 11,538.46 3.5 40,384.63 11,538.47 2.5 28,846.16 11,538.46 1.5 17,307.70 11,538.47 0.5 5,769.235,769.23 2023

So for the year 2018, we can calculate depreciation as 11538.46