Foster Corporation, a cash-basis taxpayer, borrowed $100,000 on January 1, year 1, and received $98,000 in proceeds. The loan matures in 10 years and the $100,000 principal is due on that date. Interest of $10,000 is payable on January 1 of each year beginning January 1, year 2. How much interest is deductible in year 1 and in year 2?
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