Randy recently bought a 12-unit apartment building. What is the minimum number of years in which he may depreciate the building for federal income tax purposes?
Correct Answer
A) 27.5
Under IRC section 168 and the MACRS system, residential rental property - real property from which 80% or more of gross rental income comes from dwelling units - is recovered straight-line over 27.5 years. A 12-unit apartment building meets that test, so 27.5 years is the shortest recovery period available for the building. Only the improvements are depreciated: land is never depreciable, and personal property inside the units recovers over much shorter class lives.
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Related Concepts
A special warranty deed guarantees that the grantor has not caused any title defects during their period of ownership, but does not warrant against defects that existed before the grantor acquired the property.
Title insurance is a policy that protects the insured party against financial loss from defects in title that were not discovered during the title search. Unlike other insurance, it covers past events rather than future risks.
A title search is an examination of public records to determine the history of ownership, liens, encumbrances, and other interests affecting a property. It verifies that the seller has the legal right to transfer the property.
More Transfer Of Property Questions
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