Answer:
cost recovery deduction = $1520
Step-by-step explanation:
given data
purchase price = $38,000
used the car business = 80%
used the car personal = 20%
solution
cost recovery limit are
cost recovery limit = asset value × statutory % × mid quater convention ..........1
we know car which have 5 year MACRS convention and as per MACRS depreciated 20 % in 1st year
and here this car is use so no 1st year depreciation
so we use MACRS statutory % method
cost recovery limit = $38000 × 5%
cost recovery limit = $1900
we know maximum limit is $3160
so cost of recovery is $1900
so
cost recovery deduction is
cost recovery deduction = cost recovery limit - personal use
cost recovery deduction = $1900 - ( $1900 × 20% )
cost recovery deduction = $1520
