On July 17,2011,Kevin places in service a used automobile that cost $25,000.The car is used 80% for business and 20% for personal use.In 2012,he used the automobile 40% for business and 60% for personal use.Determine the cost recovery recapture for 2012.

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Quizplus · Accepted Answer

The cost recovery recapture is calculated based on the change in business use percentage. In 2011, the business use was 80%, and in 2012, 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: (80% - 40%) x $25,000 x 20% (MACRS rate for 5-year property) = $2,000 x 20% = $400. However, since the business use dropped below 50%, the entire depreciation taken in 2011 must be recaptured, which is $448 (20% of $25,000).

On July 17,2011,Kevin Places in Service a Used Automobile That