Question

4. Quattro Enterprises, a calendar-year taxpayer, leases the twentieth floor of a building downtown. Due to employment expansion, it renovated the entire office space layout without changing the overall size of the office, spending $600,000 on these leasehold improvements (qualified improvement property). The office renovation was completed in May. Quattro also spent $1,000,000 on new computer systems and office furniture and fixtures in May on which the business used its entire Sec. 179 allowance for 2019. What is the maximum depreciation deduction available in 2019 for the leasehold improvements. A. $9,630 $40,000 $600,000 $20,000

Answer 1

The IRS does not allow deductions for leasehold improvements. But because improvements are considered part of the building, they are subject to depreciation. Under GAAP, leasehold improvement depreciation should follow a 15-year schedule, which must be re-evaluated each year based on its useful economic life

Amount of the lease hold imporvement

600000

Leasehold improvement life

15 years

Maxm possible deduction

40000

B. 40000 is the answer