On July 17, 2017, Kevin places in service a used automobile that cost $25,000. The car is used 80% for business and 20% for personal use. In 2018, he used the automobile 40% for business and 60% for personal use. Determine the cost recovery recapture for 2018.
A)$0
B)$528
C)$2,000
D)$2,500
E)None of the above

Question

Quizplus · Accepted Answer

The cost recovery recapture is calculated by taking the difference in business use percentage between the years and applying it to the depreciation taken. In 2017, the business use was 80%, and in 2018 it dropped to 40%. The difference is 40%. The depreciation taken in 2017 was $5,000 (20% of $25,000). The recapture is 40% of $5,000, which is $2,000. However, since the business use dropped below 50%, the recapture is limited to the excess depreciation over straight-line, which is $528.

On July 17, 2017, Kevin Places in Service a Used