In May 2017, Stephen acquired a used automobile for $12,000 that he used 75% for business. No Sec. 179 election was made. In 2017, Stephen's business use of the automobile decreases to 45%. As a result of this change in business use:
A) The change does not affect the way Stephen computes his 2017 depreciation
B) Stephen's depreciation in 2017 is $2,250.
C) Stephen must recapture $900 as ordinary income in 2017
D) Stephen must amend the 2017 tax return and recompute depreciation.

Question

Quizplus · Accepted Answer

When business use drops below 50%, the taxpayer must recapture excess depreciation as ordinary income. The excess depreciation is the difference between the depreciation claimed and what would have been allowed under the straight-line method.

In May 2017, Stephen Acquired a Used Automobile for $12,000