• Learning Objective 2

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Exercise 8-21 (Algorithmic) (LO. 2)

Lopez acquired and placed in service a building on June 1, 2018, for $4,237,000. Compute the depreciation deduction assuming the building is classified as (a) residential and (b) non residential.

Click here to access the depreciation table to use for this problem.

If required, round your answers to the nearest dollar.

a. Calculate Lopez's cost recovery deduction for 2023 if the building is classified as residential rental real estate. $fill in the blank 1

b. Calculate Lopez's cost recovery deduction for 2023 if the building is classified as nonresidential real estate. $fill in the blank 2

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Under the modified accelerated cost recovery system (MACRS), the cost of an asset is recovered over a predetermined period that generally is shorter than the useful life of the asset or the period that the asset is used to produce income. The MACRS rules were designed to encourage investment, improve productivity, and simplify the pertinent law and its administration.