On June 1,2015,Irene places in service a new automobile that cost $21,000.The car is used 70% for business and 30% for personal use.(Assume this percentage is maintained for the life of the car. ) She does not take additional first-year depreciation (if available).Determine the cost recovery deduction for 2016.
A)$3,160
B)$3,290
C)$3,570
D)$6,720
E)None of the above

Question

Quizplus · Accepted Answer

The cost recovery deduction for 2016 would be calculated using the Modified Accelerated Cost Recovery System (MACRS) method. Since the car was placed in service in 2015, the recovery period for passenger automobiles is 5 years. The percentage of business use is 70%, so the deduction would be calculated as follows:

$21,000 x 30% x 20% (from MACRS table for 5-year recovery period) = $1,260 (personal use portion)
$21,000 x 70% x 20% (from MACRS table for 5-year recovery period) = $4,410 (business use portion)
Total cost recovery deduction for 2016 = $4,410

Note: Since Irene did not take additional first-year depreciation, she would use the regular MACRS depreciation percentages. If she had taken first-year depreciation, the calculation would be slightly different.

On June 1,2015,Irene Places in Service a New Automobile That