Question

Once the more-than-50% business usage test is passed for listed property, it does not matter if the business usage for the property drops to 50% or less during the recovery period.

a) True
b) False

Answer 1

The statement is false. A drop in business usage below 50% during the recovery period affects the depreciation deductions for listed property.

Step-by-step explanation:

The statement 'Once the more-than-50% business usage test is passed for listed property, it does not matter if the business usage for the property drops to 50% or less during the recovery period' is **false**.

Under the tax laws, there are different guidelines for the depreciation of listed property, which includes assets used for both business and personal purposes. If the business usage drops to 50% or less during the recovery period, it affects the depreciation deductions for the property.

To illustrate this, let's consider an example:

1. If a car is used 75% for business purposes and meets the more-than-50% business usage test, it qualifies for a higher depreciation deduction.
2. However, if the business usage drops to 50% or less during the recovery period, the depreciation deduction would be reduced because it no longer qualifies as listed property.