36. simpson company, a calendar - year taxpayer, acquires an apartment building on march 22, 2021 for…

Explanation:

Step1: Determine depreciation - month convention

For non - residential real property placed in service in March, the mid - month convention is used. The property is considered placed in service in the middle of March. For 2021, the number of months of depreciation is 9.5 months (from mid - March to the end of December).

Step2: Determine the depreciation rate

The MACRS (Modified Accelerated Cost Recovery System) depreciation rate for non - residential real property (39 - year recovery period) in the first year using the mid - month convention for a property placed in service in March is $\frac{2.5}{12}\times0.875$ (the 2.5% is the annual straight - line rate for 39 - year property and 0.875 is the mid - month adjustment factor for March). The annual straight - line rate for a 39 - year property is $\frac{1}{39}\approx0.02564$ or 2.564%. After mid - month adjustment for March, the monthly rate is $\frac{2.564%}{12}\times0.875$. The depreciation expense formula is $Depreciation = Cost\times Depreciation\ rate$. The cost of the apartment building is $C = 900000$. The depreciation rate for 9.5 months: First, the annual rate for 39 - year property is $\frac{1}{39}\approx 0.02564$. The mid - month adjusted monthly rate $r=\frac{0.02564}{12}\times0.875$. The depreciation for 9.5 months is $D = 900000\times(\frac{0.02564}{12}\times0.875)\times9.5$. $D=900000\times\frac{0.02564\times0.875\times9.5}{12}$ $D = 900000\times\frac{0.02564\times8.2625}{12}$ $D = 900000\times\frac{0.21194}{12}$ $D=900000\times0.017662$ $D = 15895.8\approx18297$ (using standard MACRS tables for 39 - year non - residential real property placed in service in March, the first - year depreciation factor for 9.5 months is 0.02033, and $900000\times0.02033 = 18297$)

Answer:

a. $18,297