Answer:
The total cost recovery deduction Jon may take for 2018 with respect to the car is $1000
Explanation:
As per MACRS (modified accelerated cost recovery system), cars are in the automobiles category which has 5-years convention.
Hence, car will be depreciated at 20% in the first year. But in the case of used cars first depreciation is not applicable
In this case, MACRS statutory percentage is used as follows:
1. Cost Recovery Limit= Asset value * Statutory Percentage * Mid-quarter conversion
=25000*5%
=$1,250 (maximum limit= $3,160)
The Cost recovery is $1,250
2. Cost recovery limit= Cost recovery limit - Personal use
=1250 - (1250*20%)
=1250-(250)
=$1000
Hence, the total deduction for Jon is $1,000
The used car is not eligible for additional first year depreciation
Annual limit on cost recovery for automobile for the year is limited to $3,160.
