Question

On May 2, 2015, Pearl placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 60% for business and 40% for personal use. Determine the cost recovery for 2015. Pearl wants to maximize her deductions.

1) $3,060
2) $27,200
3) $25,000
4) $2,200
5) None of these choices are correct

Answer 1

Pearl can maximize her deductions by taking a section 179 deduction, calculating 60% of $25,000 for business use of her SUV, leading to a cost recovery of $15,000 for 2015. However, none of the answer choices match this calculation, so the correct choice is 'None of these choices are correct'.

Step-by-step explanation:

The question relates to calculating cost recovery for a business use vehicle under IRS tax guidelines. In 2015, there was a special depreciation allowance known as section 179 deduction that would allow a taxpayer to deduct up to $25,000 of the cost of qualifying vehicles with a gross vehicle weight rating (GVWR) between 6,000 and 14,000 pounds. Given Pearl's vehicle has a 6,300 lbs GVWR and she uses it 60% for business, the maximum section 179 deduction she could claim is the business-use portion of her SUV cost, which is 60% of $25,000, not the entire purchase price of the vehicle.

Therefore, the cost recovery for 2015 that Pearl could maximize would be 60% of $25,000, which is $15,000. However, none of the provided choices match this calculation, therefore, the correct option is:

• 5) None of these choices are correct