Nissa owns a building (adjusted basis of $600,000 on January 1, 2017) that she rents to Len, who operates a restaurant in the building. The municipal health department closed the restaurant for three months during 2017 because of health code violations. Under MACRS, the cost recovery deduction for 2017 would be $20,500. However, Nissa deducted cost recovery only for the nine months the restaurant was open because she waived the rent income during the three-month period the restaurant was closed.
a. What is the amount of the cost recovery deduction Nissa should report on her 2017 income tax return?
b. Calculate the adjusted basis of the building at the end of 2017.