On November 30, 2011, Constance purchased an apartment building for $750,000. Determine her cost recovery deduction for 2011 rounded to the nearest dollar?



A. $0


B. $2,400


C. $3,413

is it B

$3,413

To determine Constance's cost recovery deduction for 2011, you need to know the property's recovery period and the method of depreciation used.

1. Recovery Period: The recovery period for residential rental properties is typically 27.5 years.

2. Method of Depreciation: The Modified Accelerated Cost Recovery System (MACRS) is commonly used for calculating depreciation for income tax purposes.

To calculate the annual depreciation deduction, follow these steps:

Step 1: Determine the depreciable basis.
The depreciable basis is the original purchase price of the property minus the value of the land on which it sits. Let's assume the value of the land is $100,000 (this is an estimate).

Depreciable basis = $750,000 - $100,000 = $650,000

Step 2: Divide the depreciable basis by the recovery period.
$650,000 / 27.5 years = $23,636.36

This is the annual depreciation deduction for the property. However, since Constance purchased the property on November 30, 2011, she can only claim depreciation for the portion of the year that the property was in service.

Step 3: Calculate the partial year depreciation.
Since Constance owned the property for one month (November), you would prorate the annual depreciation deduction using the number of months the property was in service.

Partial year depreciation = $23,636.36 * (1 / 12) = $1,969.70

Rounded to the nearest dollar, the cost recovery deduction for 2011 would be $1,970. Therefore, the correct answer is not B, but C ($3,413).