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    Exchange of a Business Machine with Loss or Gains

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    Paul exchanges a business machine, which has an adjusted basis of $50,000, for a new machine worth $40,000. In addition, he receives cash of $20,000. What is the recognized gain or loss and the basis of the new machine?

    a. $0 and $30,000.
    b. $0 and $40,000.
    c. $10,000 and $40,000.
    d. $10,000 and $50,000.
    e. None of the above.

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