Jon and Ellyn form a corporation . Jon transfers inventory with a fair market value of $500,000 and a tax basis of $200,000 in exchange for 500 shares of EJ , Inc .Ellyn transfers machinery and equipment with a fair market value of $500,000 and a tax basis of $450,000 in exchange for 400 shares of EJ, Inc stock and cash of $100,000 . Ellyn originally purchased the equipment for $700,000 and claimed $250,000 of depreciation on it. What tax basis do Jon and Ellyn have in their EJ, Inc stoclk ?

A. Jon's basis is $200,000 Ellyn's basis is $500,000

B. Jon's basis is $200,000 and Ellyn's basis is $400,000

C. Jon's basis is $500,000 and Ellyn's basis is $400,000

D. Jon's basis is $200,000 and Ellyn's basis is $450,000