20. on july 17, 2020, hernan places in service a used automobile that cost $25,000. the car is used 80% for…

20. on july 17, 2020, hernan places in service a used automobile that cost $25,000. the car is used 80% for business and 20% for personal use. in 2021, he used the automobile 40% for business and 60% for personal use. hernan chooses not to take § 179 or additional first - year depreciation. determine the cost recovery recapture for 2021.\na. $0\nb. $528\nc. $2,000\nd. $2,500

20. on july 17, 2020, hernan places in service a used automobile that cost $25,000. the car is used 80% for business and 20% for personal use. in 2021, he used the automobile 40% for business and 60% for personal use. hernan chooses not to take § 179 or additional first - year depreciation. determine the cost recovery recapture for 2021.\na. $0\nb. $528\nc. $2,000\nd. $2,500

Answer

Explanation:

Step1: Determine depreciation method eligibility in 2020

In 2020, business - use is 80% ($B = 80%$), which is more than 50%. So, $\S179$ was available in 2020. But Hernan didn't take it.

Step2: Determine depreciation method eligibility in 2021

In 2021, business - use is 40% ($B = 40%$), which is less than 50%. When business - use drops below 50%, we need to recapture the excess depreciation taken in prior years. Since no $\S179$ or additional first - year depreciation was taken, there is no excess depreciation to recapture.

Answer:

a. $0