In May 2018, Stephen Acquired a Used Automobile for $12,000

question 57

Multiple Choice

In May 2018, Stephen acquired a used automobile for $12,000 that he used 75% for business.Neither Section 179 election nor bonus depreciation was claimed.In 2019, Stephen's business use of the automobile decreases to 45%.As a result of this change in business use:

• A)The change does not affect the way Stephen computes his 2019 depreciation
• B)Stephen's depreciation in 2019 is $2,250.
• C)Stephen must recapture $900 as ordinary income in 2019
• D)Stephen must amend the 2018 tax return and recompute depreciation.

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Definitions:

Factory Equipment

Fixed assets used in manufacturing processes, such as machinery and tools, necessary for producing goods.

Variable Cost

Outlays that are tied to the level of output or sales, including expenditures on materials and labor.

Cotton

A natural fiber harvested from the cotton plant, widely used in the textile industry for fabric production.

Polyester Cloth

A type of fabric made from polyester fibers, known for its durability, resistance to stretching and shrinking, and quick drying properties.