Question

on july 17, 2023 kevin placed in service a used automobile that cost $25,000. the car is used 80% for business and 20% for personal use. determine the cost recovery for 2023.

Answer 1

To determine the cost recovery for 2023, multiply the cost of the car by the business usage percentage and divide by the recovery period. Therefore, the cost recovery for 2023 would be $4,000 for the used automobile.

Step-by-step explanation:

To determine the cost recovery for 2023, we need to calculate the depreciation expense for the used automobile.

Since the car is used 80% for business and 20% for personal use, we can multiply the cost of the car by the business usage percentage (80%) to find the depreciable cost for business use: $25,000 x 0.80 = $20,000.

Next, we need to determine the applicable recovery period for the car. The depreciation recovery period for a used automobile is typically 5 years. Therefore, we can divide the depreciable cost for business use by the recovery period to find the annual depreciation expense: $20,000 / 5 = $4,000.

Therefore, the cost recovery for 2023 would be $4,000 for the used automobile.