On June 1 of the Current Year, Tab Converted a Machine

question 51

Multiple Choice

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 $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

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Definitions:

Bond Financing

Raising capital through the issuance of bonds, which are debt securities that obligate the issuer to pay interest to holders and repay the principal at maturity.

Equity Financing

The method of raising capital by selling company shares to investors, thereby exchanging ownership rights for cash investments.

Tax Deductible

Tax Deductible refers to certain expenses that individuals or businesses can subtract from their gross income to reduce the amount of taxable income.

Market Values

The present cost at which a product or service may be purchased or sold in an open market.