how to calculate depreciation of the commercial rental property for the year it is sold

[Ihatedoingtax]

I purchase the commercial property ( one store and two apartments) in March 2018. The total purchase cost was

$172,157.00 . I sold it on Sept 9 , 2021. In 2021 I did some improvement which cost about $50,000.

Question 1.

Do I put the improvement cost $50,000 as expense in 2021 or I can add $50,000 as basis cost ?

Question 2,

The first year depreciation with 39 years straight line is 158,657( exclude land cost) * 2.033%=3221

The second year and 3rd year's depreciation is 158,657*2.564%=4068

I don't how I can calculate the depreciation of 2021.

1.which month and which percentage do I use?

2. Can I add $50,000 to $158,657 as the basis cost to calculate 2021 depreciation?

Thanks,

[ThomasM125]

The improvements would be added to the basis of the property as opposed to being expensed.

For the depreciation, you would divide the cost basis ($158,657) by 39 to get the depreciation for one year. Then, divide that by twelve to get the depreciation for one month, then multiply that by the number of months you owned the property in the year of sale.

The depreciation on the $50,000 improvement would be calculated separately. Divide it by 39, then by 12, then multiply it by the number of months held in the current year.

[Rick19744]

@ThomasM125 isn't there a mid-month convention on the $50,000?

[Ihatedoingtax]

I am also thinking of using mid-month depreciation which is published in IRS table 7-1a Nonresidential Real Property Mid-Month Convention

Would you mind to show me how to calculate the depreciation of improvement $50,000 ( I did it in Jan ,2021)?

[JamesG1]

Using TurboTax Online Self-employed, I compute a 2021 depreciation amount of $1,229 for the nonresidential real property cost basis of $50,000 using:

• 39 year property
• MM convention
• SL method
• business use began 1/1/2021
• $0 land
• 100% business use

@Ihatedoingtax