On July 17, 2012, Kevin places in service a used automobile that cost $25,000.The car is used 80% for business and 20% for personal use.In 2013, he used the automobile 40% for business and 60% for personal use.Determine the cost recovery recapture for 2013.
A)$0.
B)$448.
C)$2,000.
D)$2,500.
E)None of the above.

Question

Quizplus · Accepted Answer

The cost recovery recapture is calculated by determining the excess depreciation taken in the first year due to the change in business use percentage. In 2012, the business use was 80%, and in 2013 it dropped to 40%. The depreciation recapture is based on the difference in business use percentage (80% - 40% = 40%) applied to the depreciation taken in 2012. The depreciation for 2012 would have been $3,200 (80% of $25,000 x 20% MACRS rate for 5-year property). The recapture amount is 40% of $3,200, which is $1,280. However, since the question asks for the cost recovery recapture, which is the excess depreciation over the allowable depreciation for 2013, the correct answer is $448 (40% of $1,120, which is the allowable depreciation for 2013).

On July 17, 2012, Kevin Places in Service a Used