Final answer:
The correct answer is c. Recapture; MACRS. When an asset's business use drops to 50% or below, the business must recapture any excess accelerated depreciation over the MACRS depreciation for all prior years.
Step-by-step explanation:
The correct answer is c. Recapture; MACRS.
When an asset's business use drops to 50% or below, the business must recapture any excess accelerated depreciation over the MACRS (Modified Accelerated Cost Recovery System) depreciation for all prior years. This means that the business needs to repay the tax benefits it previously received from the accelerated depreciation of the asset.
For example, if a business purchased a piece of equipment and used accelerated depreciation, but its business use dropped to 50% or below in a subsequent year, the excess depreciation taken in previous years would need to be recaptured and the deductions would need to be adjusted according to the straight-line depreciation method prescribed by MACRS.