Question

During the prior three years, listed property was being used 75% for business and 25% for personal use. For the current and future years, business use has dropped to 40%. Which of the following statements is correct?

a. The taxpayer must recapture excess depreciation.
b. The taxpayer can continue to use the same depreciation method without changes.
c. The business can claim additional bonus depreciation.
d. The business must switch to the straight-line depreciation method.

Answer 1

The taxpayer can continue to use the same depreciation method without changes.

Step-by-step explanation:

When listed property is used for both business and personal use, the portion used for business is eligible for depreciation. In this case, the listed property was used 75% for business and 25% for personal use in the prior three years. However, for the current and future years, the business use has dropped to 40%, which means that only 40% of the listed property can be depreciated.

Therefore, the correct statement is: The taxpayer can continue to use the same depreciation method without changes. The change in the business use percentage does not require the taxpayer to recapture excess depreciation, switch depreciation methods, or claim additional bonus depreciation.