The IRS uses Cost Recovery Tables to calculate the deductions you, the investor, may use to reduce the basis in a property. The rates to calculate the cost recovery (depreciation) are not the same every year when using a holding period and calculating a sale/disposition. Looking on Line 11 of the CFAW, and using a holding period of five years, calculate the cost recovery for years 1 - 5 using the following assumptions:

Acquisition Basis: $1,420,000

Cost Recovery Value - Improvements: $994,000

Useful Life: 27.5 Years

Cost Recovery Method: Straight Line

IRS Table (for residential property) Acquisition and Disposition Year Percentage: 3.485

IRS Table (for residential property) Full Year Held: 3.636

	1.	Cost Recovery for tax purposes Year 1 $36,142 Year 2 $36,142 Year 3 $36,142 Year 4 $36,142 Year 5 $36,142
	2.	Cost Recovery for tax purposes Year 1 $34,142 Year 2 $36,142 Year 3 $36,142 Year 4 $36,142 Year 5 $34,641
	3.	Cost Recovery for tax purposes Year 1 $34,641 Year 2 $36,142 Year 3 $36,142 Year 4 $36,142 Year 5 $36,641
	4.	Cost Recovery for tax purposes Year 1 $34,641 Year 2 $36,142 Year 3 $36,142 Year 4 $36,142 Year 5 $34,641