Question

when Marcus sent his daughter to college he purchased a house near campus for $95,000 empty lots in the area soul for approximately $10,000 at the time after she graduated Mark has decided to keep the house for use as rental. the fair market value at the time at the convertion was 160,000 and the price of the land had rising to 20,000. the basis for depreciation of the house is

Answer 1

The basis for Depreciation of the house is rental property depreciation

However on the above scenario when Marcus purchased the building for $95,000 that time the land value was $10,000.

Building Original cost was ($95,000-$10,000)=$85,000

$85,000 was the time when Marcus sent her daughter for college

now the value was after graduation that mean after 4 year the value for the building is

Building Original Cost is ($160,000-$20,000)=$140,000

so building price risen in 4 years is ($140,000-$85,000)= $55,000

so the value growth of the building per year is ($55,000/4)=$13,750

For the rental property as per the depreciation rule is

Residential value useful life 27.5 years