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ABC purchased specialized machinery on January 1,2010 for $2,500.Due to certain restrictions,only 40% of the acquisition cost of the asset is tax deductible.ABC pays tax at a rate of 20%.
-What is the tax basis of this asset?

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Quizplus · Accepted Answer

The tax basis of the asset is the portion of the acquisition cost that is tax deductible. Since only 40% of the $2,500 cost is deductible, the tax basis is 40% of $2,500, which is $1,000.

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