On July 17, 2014, Kevin places in service a used automobile that cost $25,000. The car is used 80% for business and 20% for personal use. In 2015, he used the automobile 40% for business and 60% for personal use. Determine the cost recovery recapture for 2015.

Question

Quizplus · Accepted Answer

The cost recovery recapture is calculated based on the change in business use percentage. In 2014, the business use was 80%, and in 2015 it dropped to 40%. The recapture amount is the difference in depreciation taken due to the change in business use. The depreciation recapture is calculated as 40% of the depreciation taken in 2014. Assuming MACRS 5-year property, the depreciation for 2014 would be $5,000 (20% of $25,000), and 40% of that is $2,000. The recapture amount is $2,000 - $1,472 (40% of $3,680, the depreciation for 2015), which equals $528.

On July 17, 2014, Kevin Places in Service a Used