Simmons LLC purchased an office building and land several years ago for $250,000. The purchase price was allocated as follows: $200,000 to the building and $50,000 to the land. The property was placed in service on October 2. If the property is disposed of on February 27 during the 10th10th year, calculate Simmons's maximum depreciation in the 10th10th year. (Use MACRS Table 5.) Multiple Choice $641 $909 $5,128 $7,346

To calculate the maximum depreciation for the 10th year of ownership under MACRS for an office building, we need to use the appropriate percentage from MACRS Table 5 for nonresidential real property, which is depreciated over 39 years using the straight-line method with a mid-month convention. According to MACRS Table 5, the depreciation rate for each full month for nonresidential real property is 1/39 per year, and since we're dealing with the 10th year, we need to consider the mid-month convention for both the placement in service and the disposal of the property. Since the property was placed in service in October and disposed of in February of the 10th year, Simmons LLC can claim depreciation for the months of October through January (4 full months) plus half a month for February due to the mid-month convention. Calculating the annual depreciation before proration: $200,000 (building portion) / 39 years = $5,128.21 per year Now, we calculate the depreciation for the 4.5 months of the 10th year: ($5,128.21 per year / 12 months) x 4.5 months = $1,907.58 Rounded to the nearest whole number, the maximum depreciation expense for the 10th year is: $1,908 None of the choices provided match this calculation, so the correct answer is: None of the choices are correct.

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