What is the reduction dollar-for-dollar based on the $2,000,000 limitation?

The correct choice highlights how the limitation of $2,000,000 affects the deduction for property costs. Under the tax regulations, when the total cost of the property exceeds $2,000,000, the deduction begins to be reduced dollar-for-dollar for the amount exceeding that limit. This means that if a taxpayer incurs costs above $2,000,000, they do not lose the entire deduction but rather take a reduced amount based on how much they exceeded the limit. For example, if the property cost is $2,100,000, the deduction would be reduced by $100,000, allowing the taxpayer to still benefit from a portion of the deduction.

The other options do not accurately capture this mechanism. If the total property cost somehow eliminated the deduction entirely, it would indicate that the deduction was lost for exceeding the limit; however, the system allows for partial deductions up to the limit rather than a complete loss. An option that suggests there are no reductions would be incorrect since the limitation specifically dictates how deductions can be calculated. Lastly, stating that the maximum deduction is simply capped at $2,000,000 does not convey the operational aspect of how deductions are adjusted based on costs exceeding this amount. Therefore, understanding the dollar-for-dollar