Terra Corp.purchased a new enterprise software system and incurred the following costs: What is Terra Corp.'s basis in the software system?

Question

Terra Corp.purchased a new enterprise software system and incurred the following costs:  What is Terra Corp.'s basis in the software system?

Quizplus · Accepted Answer

The basis of the software system includes the purchase price of $800,000 plus any additional costs incurred to bring the software system into use. Therefore, the basis is $800,000 + $20,000 for installation, $5,000 for training, and $10,000 for customization = $835,000. However, since the regulations allow for up to $15,000 of these additional costs to be expensed, the final basis is $835,000 - $15,000 = $820,000. Therefore, the correct answer is D.