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Depreciation Deductions of Rona Inc

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Rona Inc is a developer. During the year, the corporation finished construction of a complex containing a new shopping mall and office building. To enhance the environment of the complex, substantial landscaping was done including the planting of many trees, shrubs and gardens. In addition, Rona Inc acquired a massive sculpture that served as the focal point for the complex. Finally, numerous pictures were purchased which were hung in the shopping center and offices. Can depreciation deductions be claimed on any of the items noted above? if, so what will be the appreciable life for those items? Rona Jones is the President of Rona, Inc and its address is 428 Davis Avenue, Columbia. SC

Required:

(1). Write a memo and letter to the client.

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Solution Summary

The solution provides the memo needed for Rona Inc. and explains the depreciation deductions that can be taken, and the appreciable life for the items.

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April 20, 2011

To: Rona Inc.
Attn: Rona Jones, President
428 Davis Avenue
Columbia, SC

Dear Ms. Jones,

We have reviewed your accounting books and would like to address the depreciation applicable to the corporation, as per IRS rules and regulations.

The landscaping that was done, including the planting of trees, shrubs, and gardens are not depreciated. This can be used as a maintenance expense, on the corporation's income tax return.

The sculpture should be depreciated under MACRS for it's useful life, which will be a 10 year life. If you depreciate the statue for 7 years and determine after the 7th year that it should be replaced, you will need to adjust the current year's depreciation to reflect the adjustment.

The pictures that were purchased as artwork to hang in the complex are also subject to depreciation. The artwork ...

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