Over how many years is a residential income-producing property depreciated for U.S. federal income tax purposes using the straight-line method?

• A. 20 years
• B. 15 years
• C. 39 years
• D. 27.5 years

Answer: (D)

Verified step by step guidance

1. Understand the concept of depreciation: Depreciation is the allocation of the cost of a tangible asset over its useful life. For U.S. federal income tax purposes, the IRS provides specific guidelines for the depreciation of different types of properties.
2. Identify the type of property: The problem specifies that the property is a residential income-producing property. This classification is important because different types of properties have different depreciation periods under IRS rules.
3. Refer to IRS guidelines: According to the IRS, residential income-producing properties are depreciated over 27.5 years using the straight-line method. This is a fixed period set by tax regulations.
4. Understand the straight-line method: The straight-line method divides the cost of the asset evenly over its useful life. For residential properties, the annual depreciation expense is calculated as the property's cost divided by 27.5 years.
5. Apply the information: When solving similar problems, always ensure you correctly identify the type of property and use the IRS-prescribed depreciation period for accurate calculations.