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6 On June 1 of the current year, Tab converted a machine to rental property. At the time of the conversion, the machine was worth $90,000. 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?
a.     $70,000.
b.     $90,000.
c.     $120,000.
d.     $140,000.
e.     None of the above.

Submitted: 742 days and 7 hours ago.
Category: Tax
Value: $15
Status: AWAITING CUSTOMER ACTION
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Indiana

Answer

Dear mykahyi -

For depreciation purposes, the depreciable basis is the lower of cost or market value. Therefore the answer is b. $90,000

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Expert: Steven Meyerson, CPA
Pos. Feedback: 99.2 %
Accepts: 
Answered: 11/11/2007

Certified Public Accountant (CPA)

CPA, Over 29 yrs experience w/individuals and small businesses. Masters in Tax, Divorce Specialist

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