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Determine Initial Tax Basis

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An apartment house was purchased on July 8 of last year, by a taxpayer who computes her taxes on a calendar basis. Her depreciation deduction last year was $7,902. The building accounted for 65 percent of the property's market value at the time of purchase. What was the taxpayer's initial tax basis in the property?

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Solution Summary

This solution illustrates how to compute a taxpayer's basis in their apartment house if we know how large a depreciation deduction she took.

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The taxpayer will be allowed a capital recovery (depreciation) deduction according to the Modified Accelerated Cost Recovery (MACRS) method. Under this method, residential real estate (such as an apartment house) is depreciated over 27.5 years. Under the mid-month convention, property purchased at any time ...

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