Norman Exchanges a Machine He Uses in His Pool Construction

Multiple Choice

Norman exchanges a machine he uses in his pool construction business for a used machine worth $6,000 to use in the same business. He purchased the machine 3 years ago for $22,000 and has taken depreciation of $9,000 on the machine. In the exchange, Norman also receives $3,000 of cash. As a result of the exchange,
I.Norman's basis in the acquired machine is $6,000.
II.Norman recognizes a loss of $4,000 on the exchange.
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A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements are correct.
D) Neither statement is correct.