Question

Carios purchased an apartment building on November 16,2023 , for $3,000,000. Determine the cost recovery deduction for 2023.

a. $22,740
b. $11,910
c. $13,650
d. $9,630

Answer 1

The cost recovery deduction for 2023 would be $109,090.91. None of the given options are correct.

Step-by-step explanation:

The cost recovery deduction for 2023 can be determined using the Modified Accelerated Cost Recovery System (MACRS). The cost recovery deduction is based on the cost basis of the property and the recovery period assigned to the property by the IRS.

In this case, the apartment building was purchased for $3,000,000. Residential rental property has a recovery period of 27.5 years. To calculate the annual depreciation, you divide the cost basis by the recovery period: $3,000,000 / 27.5 = $109,090.91.

Therefore, the cost recovery deduction for 2023 would be $109,090.91.