Dear Mr. Johnson: I am responding to your inquiry concerning the amount of cost recovery you may deduct in the ffrst year of operation of a new taxi. If the automobile is purchased at the beginning of 2022 for $68,000, the total cost recovery deductions in the first year would be : Because the car will be used as a taxi, it subject to the cost recovery limitations imposed on passenger automobiles. This amount of cost recovery assumes that your income from your taxi business before considering this cost recovery would be at least : , and an election is made under $179 to expense the allowable amount. Alternatively, additional first-year (bonus) depreciation could be taken limitation. business income If you need additional information or clarification of our calculations, please contact me. Sincerely yours, Tanuja Singh, CPA Problem 5-44 (LO, B) Jabari Johnson is considering acquiring an automobile at the beginning of 2022 that he will use 100% of the time as a tax. The purchase price of the automobile is $68,000. Mr. Johnson has heard of cost recovery limits on automobiles and wants to know the maximum amount of the $68,000 he can deduct in the first year. Click here to access the depreciation table to use for this problem. Click here to access the limits for certain automobiles. a. Complete the letter to Mr. Johnson. The TCJA of 2017 signiffcantly increased the annual limitations beginning in 2018 . Because the 2021 indexed amounts were not available when we published, the 2020 amounts are used in the Examples and end-of-chapter problem materials b. Complete the memo for the tax files. TAX FILE MEMORANDUM DATE: December 20, 2021 FROM: Tanuja Singh SUBJECT: Jabari Johnson: Calculations for cost recovery in year of acquisition Facts: Jabari Johnson is considering purchasing an automobile at the beginning of 2022 to be used 100% as a taxi. The cost of the automobile is $68,000. Jabari wants to know the total recovery for the year of acquisition of the car. Calculations: Because the automobile will be used as a taxl, it subject to the cost recovery limitations for passenger automoblles. Therefore, Jabari elect 179 expensing. In deducting the 179 amount of , the assumption is made that Jabari's income from the taxi business before considering the 5179 expense equal or exceed $ . The total amount of cost recovery in the acquisition year would be MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention (Percentage Rates)
