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On June 1 of the current year, Tab converted a machine from personal use to rental property. At the time of the conversion, the machine was worth $80,000. Five years ago, Tab purchased the machine for
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On June 1 of the current year, Tab converted a machine from personal use to rental property. At the time of the conversion, the machine was worth $80,000. Five years ago, Tab purchased the machine for $120,000. The machine is still encumbered by a $50,000 mortgage. What is the basis of the machine for cost recovery

User Chris Farrugia
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Answer: $80,000

Step-by-step explanation:

Based on the scenario and the information given in the question, to calculate the basis of the machine for cost recovery, we have to choose the the one which is lower of the cost of the machine or the FMV when it was being converted.

In this case, the basis of the machine for cost recovery is $80,000

User Kanini
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