John owns a rental home in Arizona. He decided that he would like to acquire a rental home in Washington. Ted, who lives in Washington, has a rental home. For health purposes, Ted must relocate to Arizona and would like a rental home in Arizona. John and Ted decide to exchange properties under Section 1031 of the code.

The other facts pertaining to the exchange are: Teds Basis = $100,000 Johns Basis = $75,000

Ted and John exchange the two properties, but Ted has to give John an additional $25,000 in cash. The fair market value of Teds property is $100,000 and the fair market value of Johns property is $125,000. What is Teds new basis?

a. $25,000. b. $50,000. c. $100,000. d. $125,000.