Tom Tom LLC purchased a rental house and land during the current year for $150,000. The purchase price was allocated as follows: $100,000 to the building and $50,000 to the land. The property was placed in service on May 22. Calculate Tom Tom's maximum depreciation for this first year:

A. $1,605

B.$2,273

C. $2,408

D. $3,410

E. None of these

correct option is B.$2,273

Explanation:

given data

purchased = $150,000

building = $100,000

land = $50,000

to find out

Tom's maximum depreciation for this first year

solution

we will apply here The mid month convention applies

and recovery period for Residential property = 27.5-year

maximum depreciation will be here as

maximum depreciation = $100,000 * 2.273%

maximum depreciation = $100,000 * 0.02273

maximum depreciation = $2,273

so correct option is B.$2,273