Chapter 8 Homework
For Questions the following questions (1-4), please complete the appropriate assigned to your group.
1. Group A & B
Juan acquires a new five year class asset on March 14, 2014, for $200,000. This is the only asset acquired by Juan during the year. He does not elect immediate expensing under Section 179.He does not claim any available additional first-year depreciation. On July 15, 2015, Juan sells assets.
a. Determine Juan’s cost recovery for 2014. for 2014 and following MACRS cost recovery showed in table 8.1 total would be 40000 {200000*20%}
b. Determine Juan’s cost recovery for 2015. for 2015 and following MACRS cost recovery as showed in table 8.1 total would be 32000 which is {200000*32%} and then multiplied by .5 because it is for half of the year. see page 8-36
Group C & D
Debra acquired the following new assets during 2014:
Date Asset Cost
April 11 Furniture $40,000
July 28 Trucks $40,000
November 3 Computers $70,000
Determine the cost recovery deductions for the current year. Debra does not elect immediate expensing under Section 179. She does take additional first-year depreciation.
2. Group A & B
On April 3, 2014, 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 for 2014. since 25% of the total is for the land so the building cost would be 1500000 (2000000*75%) and this amount would be used as the basis for depreciation
Group C & D
On May 5, 2014, Christy purchased and placed in service a hotel. The hotel cost $10.8 million. Calculate Christy’s cost recovery for 2014 and for 2024.