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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 $75,800 and machine 1's adjusted basis was $40,400 at the time of the exchange. Machine 2's seller purchased it for $64,600 and machine 2's adjusted basis was $55,400 at the time of the exchange. What is Koch's adjusted basis in machine 2 after the exchange?
Multiple Choice
A- $55,400.B- None of the choices are correct.C- $50,000.D- $75,800.E- $40,400.
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