Alpha Sold Machinery That It Used in Its Business to Beta

question 61

Multiple Choice

Alpha sold machinery that it used in its business to Beta, a related entity, for $40,000. Beta used the machinery in its business. Alpha bought the machinery a few years ago for $50,000 and has claimed $30,000 of depreciation expense. What is the amount and character of Alpha's gain?

• A)$20,000 ordinary income under §1239.
• B)$10,000 ordinary gain and $10,000 §1231 gain.
• C)$20,000 §1231 gain.
• D)$20,000 capital gain.
• E)None of the choices are correct.