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On June 5, 2018, Leo purchased and placed in service a new car that cost $75,000....

On June 5, 2018, Leo purchased and placed in service a new car that cost $75,000. The business use percentage for the car is always 100%. Leo does not claim any available additional first-year depreciation. Compute Leo’s cost recovery deduction for 2018 and 2019

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Answer #1

Cost of the car= $75,000

Out of which, employed for business use= 100% of $75,000 = $ 75,000

Cost recovery deduction is in the form of depreciation for a tangible fixed asset.

Therefore, as per the general uselife life estimation for a licensed vehicle, the cost of the asset is considered to be depreciated on a straight line basis for 8 years.

Depreciation per annum= $75,000/ 8 years =$9,375.

Therefore, cost recovery deduction for 2018 and 2019 is $9,375 each.

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