Desert Manufacturing Company owned a permanent building costing OMR 80,000 and land costing OMR 100,000 for the tax year 2020. Determine the deductible or non-deductible amount und... Desert Manufacturing Company owned a permanent building costing OMR 80,000 and land costing OMR 100,000 for the tax year 2020. Determine the deductible or non-deductible amount under each case: Case A: The company claimed depreciation on the permanent building @ 9% p.a. and land @ 20% p.a. Case B: The company did not claim any depreciation for any depreciable asset.
Understand the Problem
The question asks to determine the deductible depreciation expense for a permanent building and land in two different cases: one where depreciation is claimed, and another where it is not. The key issue is to understand whether land is depreciable and to calculate the allowable depreciation expense for the building under Omani tax laws.
Answer
Case A: OMR 7,200 (building depreciation). Land is non-deductible. Case B: OMR 0 (no depreciation claimed).
Case A: Depreciation on land is not deductible. The deductible amount is the depreciation on the building. Depreciation = OMR 80,000 * 9% = OMR 7,200. Case B: If no depreciation is claimed, the deductible amount is OMR 0.
Answer for screen readers
Case A: Depreciation on land is not deductible. The deductible amount is the depreciation on the building. Depreciation = OMR 80,000 * 9% = OMR 7,200. Case B: If no depreciation is claimed, the deductible amount is OMR 0.
More Information
Land is generally not depreciable because it does not wear out, become obsolete, or get used up. Only the building is depreciable.
Tips
The most common mistake is to depreciate the land, which is not allowed.
Sources
- United States - Corporate - Deductions - PwC Tax Summaries - taxsummaries.pwc.com
- Instructions for Form 1120 (2024) | Internal Revenue Service - irs.gov
- Canada - Corporate - Deductions - PwC Tax Summaries - taxsummaries.pwc.com
AI-generated content may contain errors. Please verify critical information
