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Problem 1: Koch traded machine 1 for machine 2 when the fair market value of both machines was $50,000. Koch originally purchased machine 1 for $75,900 and machine 1's adjusted basis was $40,450 at the time of the exchange. Machine 2's seller purchased it for $64,550 and machine 2's adjusted basis was $55,450 at the time of the exchange. What is Koch's adjusted basis in machine 2 after the exchange?
Option 1: $40,450. Option 2: $50,000. Option 3: $55,450. Option 4: $75,900. Option 5: None of the choices are correct.
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