Final answer:
Depreciation expense decreases due to a change from accelerated depreciation to the straight-line method when business use falls below 50%. Gain or loss on the sale is affected by the business use percentage, and additional personal use will indeed impact tax deductions, but the property remains eligible for adjusted deductions. The correct option is A.
Step-by-step explanation:
Regarding listed property that was previously used 75% for business and 25% for personal use, where current and future business use is dropping to 40%, it is accurate to state that depreciation expense decreases for the current and future years.
When business use of a listed property drops below 50%, the method of computing depreciation changes to the straight-line method, which often results in lower annual depreciation deductions. Furthermore, the gain or loss on the sale of the property is indeed affected by the change in business use because the portion of the gain that corresponds to the decrease in business use may be recaptured as ordinary income.
It's important to note that additional personal use will impact tax deductions. More personal usage means less business usage, which can affect the allocation of expenses between personal and business deductions. Lastly, the property does not become ineligible for any tax deductions, but the amount deductible will be adjusted to reflect the change in the usage percentage.