On April 3, 2021, Terry purchased and placed in service a building that cost $2,000,000. An...

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On April 3, 2021, Terry purchased and placed in service a building that cost $2,000,000. 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. If required, round your answers to the nearest dollar. Click here to access the depreciation table to use for this problem. a. How is the property classified for MACRS? b. What is the life of the asset for MACRS? c. Determine Terry's cost recovery deduction for 2021. Exhibit 8.7 ADS Straight-Line for Personal Property Assuming Half-Year Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 (Partial Table).* Recovery Year 3-Year 5-Year 7-Year 10-Year 16.67 7.14 5.00 33.33 10.00 33.33 16.67 1 2 3 4 5 6 Jove 10.00 20.00 20.00 20.00 20.00 10.00 14.29 14.29 14.29 14.29 14.29 14.29 10.00 10.00 10.00 10.00 10.00 12-Year 4.17 8.33 8.33 8.33 8.33 8.33 8.34 Exhibit 8.8 MACRS Straight-Line Depreciation for Real Property Assuming Mid-Month Convention* (Percentage Rates) *The official tables contain a separate row for each year. For ease of presentation, certain years are grouped in these tables. In some instances, this will produce a difference of .001 for the last digit when compared with the official tables. For Property Placed in Service after December 31, 1986: 27.5-Year Residential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property Is Placed in Service): Year(s) 4 5 11 6 7 8 9 10 1.970 1.667 1.364 1.061 0.758 3.636 3.636 3.637 3.637 3.485 3.636 0.000 0.152 3.636 3.636 3.636 3.637 3.637 3.637 3.636 3.636 0.455 0.758 1 2-18 19-27 28 29 1 2 3 3.485 3.182 2.879 2.576 2.273 3.636 3.636 3.636 3.636 3.636 3.637 3.637 3.637 3.637 3.637 1.970 2.273 2.576 2.879 3.182 0.000 0.000 0.000 0.000 0.000 1 2-19 20-31 32 33 12 0.455 0.152 3.636 3.637 3.636 3.636 1.061 1.364 For Property Placed in Service after December 31, 1986, and before May 13, 1993: 31.5-Year Nonresidential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property Is Placed in Service): Year(s) 4 1 2 3 5 6 7 8 9 10 11 3.042 2.778 2.513 2.249 1.984 1.720 1.455 3.175 3.175 3.175 3.175 3.175 3.175 3.175 3.174 3.174 3.174 3.174 3.174 3.174 3.174 1.720 1.984 2.249 2.513 2.778 3.042 3.175 0.000 0.000 0.000 0.000 0.000 0.000 0.132 0.661 0.397 3.175 3.175 1.190 0.926 3.175 3.175 3.174 3.174 3.174 3.174 3.175 3.175 3.175 3.175 0.397 0.661 0.926 1.190 3.636 3.637 3.636 1.667 12 0.132 3.175 3.174 3.175 1.455 For Property Placed in Service after May 12, 1993: 39-Year Nonresidential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property is placed in Service): + Recovery Year(s) 1 2-39 40 Recovery Year The Applicable Percentage Is (Use the Column for the Month in the First Year the Property Is Placed in Service): 2 3 4 5 6 10 11 2.247 2.033 1.819 1.605 1.391 2.564 2.564 2.564 2.564 2.564 0.321 0.535 0.749 0.963 1.177 7 8 9 1.177 0.963 0.749 2.564 2.564 1.391 1.605 Exhibit 8.9 ADS Straight-Line for Real Property Assuming Mid-Month Convention (Percentage Rates) 1 2-30 31 1 2.461 2.564 0.107 For Property Placed in Service after December 31, 2017; 30-Year Residential Rental Property Month Placed in Service 6 7 1.806 1.528 3.333 3.333 1.528 1.806 Recovery Year 12 0.535 2.564 2.564 1.819 2.033 2.247 2.461 0.321 0.107 2.564 2.564 1 2 3.194 2.917 3.333 3.333 0.139 0.417 3 4 5 2.361 2.639 2.083 3.333 3.333 3.333 0.694 0.972 1.250 9 11 8 10 1.250 0.972 0.694 0.417 3.333 3.333 3.333 3.333 2.083 2.361 2.639 2.917 For Property Placed in Service after December 31, 1986; 40-Year Nonresidential Real Property* 1 2 3 10 11 Month Placed in Service 5 6 7 8 9 2.396 2.188 1.979 1.771 1.563 1.354 1.146 0.938 0.729 0.521 0.313 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 0.104 0.312 0.521 0.729 0.937 1.146 1.354 1.771 1.979 2.187 1.562 1 2-40 41 * Also used for residential rental property placed in service before 2018. 12 0.139 3.333 3.194 12 0.104 2.500 2.396 + Exhibit 8.3 MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 3-Year 5-Year (200% DB) (200% DB) Recovery Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 33.33 44.45 14.81* 7.41 20.00 32.00 19.20 11.52* 11.52 5.76 7-Year (200% DB) 14.29 24.49 17.49 12.49 8.93* 8.92 8.93 4.46 10-Year (200% DB) 10.00 18.00 14.40 11.52 9.22 7.37 6.55* 6.55 6.56 6.55 3.28 15-Year (150% DB) 5.00 9.50 8.55 7.70 6.93 6.23 5.90* 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 20-Year (150% DB) 3.750 7.219 6.677 6.177 5.713 5.285 4.888 4.522 4.462* 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 18 19 20 21 *Switchover to straight-line depreciation. 4.461 4.462 4.461 2.231 Exhibit 8.4 MACRS Accelerated Depreciation for Personal Property Assuming Mid-Quarter Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 (Partial Table * ) 3-Year Recovery Year 1 2 Recovery Year 1 2 First Quarter Second Quarter Third Quarter Fourth Quarter 58.33 27.78 First Quarter 35.00 26.00 41.67 38.89 5-Year Second Quarter 25.00 30.00 25.00 50.00 8.33 15.00 34.00 61.11 Third Quarter Fourth Quarter 5.00 38.00 Exhibit 8.5 MACRS Straight-Line Depreciation for Personal Property Assuming Half-Year Convention * For Property Placed in Service after December 31, 1986 MACRS Class 3-year 5-year 7-year 10-year 15-year % First Recovery Year 16.67 10.00 7.14 5.00 3.33 Other Recovery Years Last Recovery Year Years Year % 2-3 2-5 2-7 2-10 2-15 % 33.33 20.00 14.29 10.00 6.67 4 6 8 11 16 16.67 10.00 7.14 5.00 3.33 Note: The last two rows of this table are used for qualified improvement property (15-year normal MACRS; 20-year ADS). Exhibit 8.6 Alternative Minimum Tax: 150% Declining-Balance Assuming Half-Year Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 (Partial Table*) 5-Year 9.5-Year 150% 150% Recovery Year 1 2 MS 67 ∞0 4 5 8 9 10 11 12 13 3-Year 150% 25.00 37.50 25.00** 12.50 15.00 25.50 17.85 16.66** 16.66 8.33 7-Year 150% 10.71 19.13 15.03 12.25** 12.25 12.25 12.25 6.13 7.89 14.54 12.25 10.31 9.17** 9.17 9.17 9.17 9.17 9.16 10-Year 150% 7.50 13.88 11.79 10.02 8.74** 8.74 8.74 8.74 8.74 8.74 4.37 12-Year 150% 6.25 11.72 10.25 8.97 7.85 7.33** 7.33 7.33 7.33 7.33 7.32 7.33 3.66 *The figures in this table are taken from the official table that appears in Rev.Proc. 87-57,1987-2 C.B. On April 3, 2021, Terry purchased and placed in service a building that cost $2,000,000. 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. If required, round your answers to the nearest dollar. Click here to access the depreciation table to use for this problem. a. How is the property classified for MACRS? b. What is the life of the asset for MACRS? c. Determine Terry's cost recovery deduction for 2021. Exhibit 8.7 ADS Straight-Line for Personal Property Assuming Half-Year Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 (Partial Table).* Recovery Year 3-Year 5-Year 7-Year 10-Year 16.67 7.14 5.00 33.33 10.00 33.33 16.67 1 2 3 4 5 6 Jove 10.00 20.00 20.00 20.00 20.00 10.00 14.29 14.29 14.29 14.29 14.29 14.29 10.00 10.00 10.00 10.00 10.00 12-Year 4.17 8.33 8.33 8.33 8.33 8.33 8.34 Exhibit 8.8 MACRS Straight-Line Depreciation for Real Property Assuming Mid-Month Convention* (Percentage Rates) *The official tables contain a separate row for each year. For ease of presentation, certain years are grouped in these tables. In some instances, this will produce a difference of .001 for the last digit when compared with the official tables. For Property Placed in Service after December 31, 1986: 27.5-Year Residential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property Is Placed in Service): Year(s) 4 5 11 6 7 8 9 10 1.970 1.667 1.364 1.061 0.758 3.636 3.636 3.637 3.637 3.485 3.636 0.000 0.152 3.636 3.636 3.636 3.637 3.637 3.637 3.636 3.636 0.455 0.758 1 2-18 19-27 28 29 1 2 3 3.485 3.182 2.879 2.576 2.273 3.636 3.636 3.636 3.636 3.636 3.637 3.637 3.637 3.637 3.637 1.970 2.273 2.576 2.879 3.182 0.000 0.000 0.000 0.000 0.000 1 2-19 20-31 32 33 12 0.455 0.152 3.636 3.637 3.636 3.636 1.061 1.364 For Property Placed in Service after December 31, 1986, and before May 13, 1993: 31.5-Year Nonresidential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property Is Placed in Service): Year(s) 4 1 2 3 5 6 7 8 9 10 11 3.042 2.778 2.513 2.249 1.984 1.720 1.455 3.175 3.175 3.175 3.175 3.175 3.175 3.175 3.174 3.174 3.174 3.174 3.174 3.174 3.174 1.720 1.984 2.249 2.513 2.778 3.042 3.175 0.000 0.000 0.000 0.000 0.000 0.000 0.132 0.661 0.397 3.175 3.175 1.190 0.926 3.175 3.175 3.174 3.174 3.174 3.174 3.175 3.175 3.175 3.175 0.397 0.661 0.926 1.190 3.636 3.637 3.636 1.667 12 0.132 3.175 3.174 3.175 1.455 For Property Placed in Service after May 12, 1993: 39-Year Nonresidential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property is placed in Service): + Recovery Year(s) 1 2-39 40 Recovery Year The Applicable Percentage Is (Use the Column for the Month in the First Year the Property Is Placed in Service): 2 3 4 5 6 10 11 2.247 2.033 1.819 1.605 1.391 2.564 2.564 2.564 2.564 2.564 0.321 0.535 0.749 0.963 1.177 7 8 9 1.177 0.963 0.749 2.564 2.564 1.391 1.605 Exhibit 8.9 ADS Straight-Line for Real Property Assuming Mid-Month Convention (Percentage Rates) 1 2-30 31 1 2.461 2.564 0.107 For Property Placed in Service after December 31, 2017; 30-Year Residential Rental Property Month Placed in Service 6 7 1.806 1.528 3.333 3.333 1.528 1.806 Recovery Year 12 0.535 2.564 2.564 1.819 2.033 2.247 2.461 0.321 0.107 2.564 2.564 1 2 3.194 2.917 3.333 3.333 0.139 0.417 3 4 5 2.361 2.639 2.083 3.333 3.333 3.333 0.694 0.972 1.250 9 11 8 10 1.250 0.972 0.694 0.417 3.333 3.333 3.333 3.333 2.083 2.361 2.639 2.917 For Property Placed in Service after December 31, 1986; 40-Year Nonresidential Real Property* 1 2 3 10 11 Month Placed in Service 5 6 7 8 9 2.396 2.188 1.979 1.771 1.563 1.354 1.146 0.938 0.729 0.521 0.313 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 2.500 0.104 0.312 0.521 0.729 0.937 1.146 1.354 1.771 1.979 2.187 1.562 1 2-40 41 * Also used for residential rental property placed in service before 2018. 12 0.139 3.333 3.194 12 0.104 2.500 2.396 + Exhibit 8.3 MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 3-Year 5-Year (200% DB) (200% DB) Recovery Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 33.33 44.45 14.81* 7.41 20.00 32.00 19.20 11.52* 11.52 5.76 7-Year (200% DB) 14.29 24.49 17.49 12.49 8.93* 8.92 8.93 4.46 10-Year (200% DB) 10.00 18.00 14.40 11.52 9.22 7.37 6.55* 6.55 6.56 6.55 3.28 15-Year (150% DB) 5.00 9.50 8.55 7.70 6.93 6.23 5.90* 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 20-Year (150% DB) 3.750 7.219 6.677 6.177 5.713 5.285 4.888 4.522 4.462* 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 18 19 20 21 *Switchover to straight-line depreciation. 4.461 4.462 4.461 2.231 Exhibit 8.4 MACRS Accelerated Depreciation for Personal Property Assuming Mid-Quarter Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 (Partial Table * ) 3-Year Recovery Year 1 2 Recovery Year 1 2 First Quarter Second Quarter Third Quarter Fourth Quarter 58.33 27.78 First Quarter 35.00 26.00 41.67 38.89 5-Year Second Quarter 25.00 30.00 25.00 50.00 8.33 15.00 34.00 61.11 Third Quarter Fourth Quarter 5.00 38.00 Exhibit 8.5 MACRS Straight-Line Depreciation for Personal Property Assuming Half-Year Convention * For Property Placed in Service after December 31, 1986 MACRS Class 3-year 5-year 7-year 10-year 15-year % First Recovery Year 16.67 10.00 7.14 5.00 3.33 Other Recovery Years Last Recovery Year Years Year % 2-3 2-5 2-7 2-10 2-15 % 33.33 20.00 14.29 10.00 6.67 4 6 8 11 16 16.67 10.00 7.14 5.00 3.33 Note: The last two rows of this table are used for qualified improvement property (15-year normal MACRS; 20-year ADS). Exhibit 8.6 Alternative Minimum Tax: 150% Declining-Balance Assuming Half-Year Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 (Partial Table*) 5-Year 9.5-Year 150% 150% Recovery Year 1 2 MS 67 ∞0 4 5 8 9 10 11 12 13 3-Year 150% 25.00 37.50 25.00** 12.50 15.00 25.50 17.85 16.66** 16.66 8.33 7-Year 150% 10.71 19.13 15.03 12.25** 12.25 12.25 12.25 6.13 7.89 14.54 12.25 10.31 9.17** 9.17 9.17 9.17 9.17 9.16 10-Year 150% 7.50 13.88 11.79 10.02 8.74** 8.74 8.74 8.74 8.74 8.74 4.37 12-Year 150% 6.25 11.72 10.25 8.97 7.85 7.33** 7.33 7.33 7.33 7.33 7.32 7.33 3.66 *The figures in this table are taken from the official table that appears in Rev.Proc. 87-57,1987-2 C.B.

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a Property Classification Residential rental real estate Explanation The term residential ... View the full answer