In January 2006 you bought a used car costing $28,600 that you used 100% for business every year from 2006 through 2011. You elected not to claim first-year expensing for 2006. Your depreciation deductions for the six-year recovery period under the 200% declining balance method were limited because of the annual deduction ceilings (Table 43-2). For 2006 through 2010, you deducted the annual ceiling amounts. For 2011, your deduction ($1,647) was based on the MACRS half-year convention rate table (Table 43-4) because this amount was less than the annual ceiling ($1,775). Total depreciation deductions for 2006–2011 were $15,807, as shown below.

At the beginning of 2012, your unrecovered basis in the car is $12,793 (the original basis of $28,600 minus the $15,807 of depreciation deductions allowed from 2006 through 2011). If you continue to use the car 100% for business in 2012 and later years, you can deduct $1,775 in 2012 and also in later years until the $12,793 of unrecovered basis is used up. In years of partial business use, the deduction will be limited to $1,775 multiplied by the business-use percentage.

If you had not used the car for business 100% of the time in all prior years, your unrecovered basis would still be $12,793. That is because for purposes of figuring unrecovered basis, you must reduce original basis by the depreciation that would have been allowed based on 100% business use.