Kyle drives a race car in his spare time and on weekends.His records regarding this activity reflect the following information for the year. What is the allowable deduction (before any AGI limitation)for depreciation assuming that this activity is not engaged in for profit and Kyle can itemize his deductions?

Question

Kyle drives a race car in his spare time and on weekends.His records regarding this activity reflect the following information for the year.  What is the allowable deduction (before any AGI limitation)for depreciation assuming that this activity is not engaged in for profit and Kyle can itemize his deductions?

Quizplus · Accepted Answer

Since the activity is not engaged in for profit, Kyle cannot deduct any expenses related to the race car. However, he can still deduct depreciation, which is calculated as the cost of the race car divided by its useful life. In this case, Kyle can only deduct the portion of the depreciation that relates to the portion of the year that the race car was used for the activity. Assuming the race car was used for the entire year and has a useful life of 5 years, the allowable deduction for depreciation would be $1,400 (i.e. the cost of the race car divided by 5, which is $7,000 divided by 5).

Kyle Drives a Race Car in His Spare Time and on Weekends.His