Harriet purchased an office building that is a certified historic structure. Harriet paid $100,000 for the...
- Harriet purchased an office building that is a certified
historic structure. Harriet paid $100,000 for the building, and
over the next 15 months, she spent an additional $150,000 to
rehabilitate it.
- Compute Harriet’s rehabilitation credit.
- Compute Harriet’s basis in the building for depreciation purposes if she elects to take the rehabilitation credit.
Homework Answers
Answer :
(a) Computation of Harriet's rehabilitation credit
Rehabilitation credit is allowed on percentage basis on the expenditure incurred for rehabilitation . Since in this case office building is a certified historic structure, eligible for rehabilitation credit.
In the given case Harriet spent 150000 for rehabilitation.
Therefore Rehabilitation credit = $150000*20% = $30000.
(b) Computation of Harriet's basis in the building for depreciation purposes if she elects to take the rehabilitation credit.
In such a case rehabilitation credit should be reduced from the cost of building.
Therefore cost of the building including rehabilitation cost = $100000+$150000 = $250000
Rehabilitation credit = $30000
Hence Harriet's basis in the building for depreciation purposes = $250000-$30000 = $ 220000.
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