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Randy owns and rents a residential duplex that he purchased 17 years ago in the month...

Randy owns and rents a residential duplex that he purchased 17 years ago in the month of May. The purchase price was $250,000. During August of the current year, Randy sold the duplex. What is the amount of depreciation that can be deducted in the current year (rounded to the nearest dollar)?

$6,410

$5,681

$9,090

$6,439

$4,006

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Answer #1

Solution: The answer is $ 5,681

Depreciation = $250,000 * 3.636% * ( 7.5 / 12 ) = $5681.25 ( $ 5,681 Approx)

Note:

1) We used macrs mid month convention for residential properties under straight line basis.

2) Under this current year depreciation rate is 3.636% for whole year but we have sold the asset in august. So depreciation is calculated proportionately. Under mid month convention, if an asset is used for only part of the month before it is sold then for depreciation purpose only 15 days are considered for calculation.

3) Total months = 7.5 months (7 months from january to july and 0.5 month for august)

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