simple math work.......................................

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Steve purchased his home for $500,000. As a sole proprietor, he operates a certified public accounting practice in his home. For this business, he uses one room exclusively and regularly as a home office. In year 1, $3,042 of depreciation expense on the home office was 

Jul 24th, 2015

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Calculation of Adjusted basis in the home.

Depreciation expenses for Year 1 = $3,042

Depreciation expenses for Year 2 = $3,175

Total Depreciation cost = $3,042 + $3,175

Total Depreciation cost = $6,217

The adjusted basis must be reduced by the greater of the depreciation allowed ($3,042) or allowable ($6,217)

Adjusted basis in the home = Cost � Depreciation amount

Adjusted basis in the home = $500,000 � $6,217

Adjusted basis in the home = $497,783


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Jul 24th, 2015

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