On July 1, Alexandra contributes business equipment (which she had purchased two years ago) having a $45,000 FMV and a $40,000 adjusted basis to the AX Partnership in exchange for a 25% interest in the capital and profits. The basis of Alexandra's partnership interest is
A. $40,000.
B. $45,000.
C. $5,000.
D. None of the above.
Answer: A
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