Maude exchanges a business machine for a new business machine. The adjusted basis of the old machine is $62,000 and the fair market value of the new machine is $70,000. The recognized gain or loss and the basis of the new machine is:

A. $0 and $0

B. $0 and $62,000

C. $0 and $70,000

D. $8,000 and $70,000

E. none of the above

D. $8,000 and $70,000

Explanation:

Data provided as per the question:-

Old machine = $62,000

New machine = $70,000

The computation of recognized gain or loss is shown below:-

Realized gain = New machine - Old machine

= $70,000 - $62,000

= $8,000

Therefore, for computing the realized gain we simply deduct old machine from new machine the fair base value is $70,000, so it has been recorded.