20. 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? 00000 a. $90,000 b. $120,000 c. $140,000 d. $70,000 e. None of these choices are correct. 21. Tara purchased a machine for $40,000 to be used in her business. The cost recovery allowed and allowable for the three years the machine was used are computed as follows: Year 1 Year 2 Year 3 Cost Recovery Allowed $ 16,000 9,600 5,760 Cost Recovery Allowable $ 8,000 12,800 7,680 If Tara sells the machine after three years for $15,000, how much gain should she recognize? $9,240 b. $11,480 c. $3,480 d. $6,360 e. None of these choices are correct.