Nanci Purchases All of the Assets of Michael's Security Service

Nanci purchases all of the assets of Michael's Security Service for $200,000. The assets are as follows:
?
$$\begin{array} { l r r } \text { Asset } & \text { Adjusted Basis } & \text { Fair Market Value } \\\text { Inventory } & \$ 25,000 & \$ 50,000 \\\text { Equipment } & 60,000 & 40,000 \\\text { Supplies } & 20,000 & 20,000 \\\text { Building } & 80,000 & 95,000 \\\text { Land } & 10,000 & 20,000 \\& \$ 195,000 & \$ 225,000\end{array}$$
What is Nanci's basis in the equipment?

A) $17,776
B) $35,556
C) $40,000
D) $60,000
E) $61,538