Real Estate Math
A building was purchased for $500,000. The land value is $100,000. Using straight-line depreciation over 39 years (commercial), what is the annual depreciation deduction for the building?
A$10,256✓ Correct
B$12,821
C$15,000
D$25,641
Explanation
Depreciable basis = $500,000 − $100,000 (land) = $400,000. Annual depreciation = $400,000 / 39 = $10,256.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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