What is the adjusted basis of a machine for cost recovery that was purchased for $120,000 and now has a fair market value of $90,000?

The adjusted basis of an asset is generally determined by its original cost, which includes the purchase price and any additional costs necessary to prepare the asset for its intended use. In this case, the machine was purchased for $120,000. The fair market value of the machine, which is now $90,000, does not affect the basis used for cost recovery purposes.

Cost recovery under depreciation does not account for the market value but rather relies on the initial investment in the asset, which in this scenario remains $120,000. Therefore, the adjusted basis is simply the original cost of $120,000 for cost recovery calculations, since it does not get adjusted for changes in market value.

The other amounts mentioned do not reflect this original invested amount correctly: $70,000 appears to be a miscalculation, and $140,000 exceeds the initial cost, which is not applicable in this context. Thus, the correct figure reflecting the starting point for cost recovery on the machine is the full initial purchase price of $120,000.