Koch Traded Machine 1 for Machine 2

Koch traded machine 1 for machine 2. Koch originally purchased machine 1 for $75,000 and machine 1's adjusted basis was $40,000 at the time of the exchange. Machine 2'sseller purchased it for $65,000 and machine 2's adjusted basis was $55,000 at the time of the exchange. What is Koch's adjusted basis in machine 2 after the exchange?

A) $55,000.
B) $50,000.
C) $40,000.
D) $75,000.
E) None of the choices are correct.

Correct Answer:

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