Asked by Amber Lloyd on Jul 22, 2024
Verified
On April 23,2017,Bailey purchased an automobile for $25,000.The car is used 80% for business and 20% for personal use.What is the cost recovery deduction for 2017 and 2018 assuming the 50% bonus was taken? (Round answers to the nearest dollar)
Cost Recovery Deduction
Tax deductions allowed for the depreciation or amortization of certain property used in a business or for income-producing purposes.
Bonus Depreciation
An incentive for businesses, allowing them to immediately deduct a significant portion of the purchase price of eligible business assets in the year they are placed in service.
- Understand the principles of cost recovery deductions and their application to different types of assets.
- Analyze the implications of business versus personal use on tax deductions for expenses and assets.
Verified Answer
HM
Haley MorrisonJul 23, 2024
Final Answer :
2017 $25,000 × 80% × 50% = $10,000 but limited to $8,928 ($11,160 × .80 luxury limit).
2018 ($25,000 × 80%)- $8,928 = $11,072 × 32% 2nd year MACRS = $3,543 - there is no further limitation because it is below the max of $4,080 ($5,100 × .80 luxury limit).
2018 ($25,000 × 80%)- $8,928 = $11,072 × 32% 2nd year MACRS = $3,543 - there is no further limitation because it is below the max of $4,080 ($5,100 × .80 luxury limit).
Learning Objectives
- Understand the principles of cost recovery deductions and their application to different types of assets.
- Analyze the implications of business versus personal use on tax deductions for expenses and assets.
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