A Corporation Exchanges Machinery Plus $20,000 Cash for New Machinery

Multiple Choice

A corporation exchanges machinery plus $20,000 cash for new machinery worth $34,000. At the time of the exchange, the corporation's adjusted basis in the machine it exchanges is $16,000 and its fair market value is $14,000. What amount will the corporation recognize on the exchange and what will be its depreciable basis in the new machine?

A) $0 and $36,000, respectively.
B) $0 and $34,000, respectively.
C) $2,000 loss and $34,000, respectively.
D) $20,000 gain and $16,000, respectively.