Exam 8: Depreciation, Cost Recovery, Amortization, and Depletion

For a new car that is used predominantly in business, the "luxury auto" limit depends on whether the taxpayer takes MACRS or straight-line depreciation.

Under MACRS, the double-declining balance method is used for property other than real estate with a recovery period of 15 or 20 years.

Once the more-than-50% business usage test is passed for listed property, it still matters if the business usage for the property drops to 50% or less during the recovery period.

On May 30, 2018, Jane purchased a factory building to use for her business.In August 2019, Jane paid $300,000 for improvements to the building.Determine Jane's total deduction with respect to the building improvements for 2019.

Rod paid $1,950,000 for a new warehouse on April 14, 2019.He sold the warehouse on September 29, 2024. Determine the cost recovery deduction for 2019 and 2024.

The cost recovery period for three-year class property is four years.

On June 1, 2018, Irene places in service a new automobile that cost $21,000.The car is used 70% for business and 30% for personal use.(Assume this percentage is maintained for the life of the car.) She does not take additional first-year depreciation.Determine the cost recovery deduction for 2019.

Polly purchased a new hotel on July 20, 2019, for $6,000,000.On January 20, 2026, the building was sold.Determine the cost recovery deduction for the year of the sale.