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.

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Definitions:

Gastrointestinal Bleeding

Bleeding occurring anywhere along the gastrointestinal tract, from the mouth to the rectum, which can manifest as vomit or stool that is bloody or black.

Packed Red Blood Cells

Red blood cells that have been separated for transfusion, used to treat or prevent symptoms of anemia.

Gauge Needle

A measure of needle thickness, with higher gauge numbers indicating thinner needles commonly used for injections.

Vastus Lateralis

A large muscle on the side of the thigh, part of the quadriceps group, important for extending the knee and stabilizing the leg.