Question

2. On May 28, 2018, Marty purchased and placed into service a new $20,000 car. The car was used 40% for business, 30% for production of income and 30% for personal use. Compute Marty’s cost recovery deduction for 2018.

Answer 1

Solution :-

2 ):-

Given data,

Service for a new car = $20,000

For personal use = 30%

The car was used for business = 40%

• Here we need to findout the Marty’s cost recovery deduction for 2018 .
• First we are finding the cost recovery for 5-year asset.

Cost recovery = 20,000 * 30%

= 20,000 * 0.30

= $6,000 .00

Cost recovery =  $6,000 .00  

the cost recovery deduction for the 1st year is $3,160 . so, we can reduce the 30% in deduction.

Now , find the cost recovery for the first year.

Cost recovery = 3,160 * ( 100% - 30% )

= 3,160 * 70%

= 3,160 * 0.70

= $2,212

Cost recovery in 2018 = $2,212