Question

On October 15, 2019, Jon purchased and placed in service a used car. The purchase price was $38,000. This was the only business use asset Jon acquired in 2019. He used the car 80% of the time for business and 20% for personal use. Jon used the regular MACRS method. Calculate the total cost recovery deduction Jon may take for 2019 with respect to the car.

Answer 1

cost recovery deduction = $1520

Explanation:

given data

purchase price = $38,000

used the car business = 80%

used the car personal = 20%

solution

cost recovery limit are

cost recovery limit = asset value × statutory % × mid quater convention ..........1

we know car which have 5 year MACRS convention and as per MACRS depreciated 20 % in 1st year

and here this car is use so no 1st year depreciation

so we use MACRS statutory % method

cost recovery limit = $38000 × 5%

cost recovery limit = $1900

we know maximum limit is $3160

so cost of recovery is $1900

so

cost recovery deduction is

cost recovery deduction = cost recovery limit - personal use

cost recovery deduction = $1900 - ( $1900 × 20% )

cost recovery deduction = $1520