Alpha Sold Machinery, Which It Used in Its Business, to Beta

question 103

Multiple Choice

Alpha sold machinery, which 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 ordinary gain.
• D) $20,000 capital gain.
• E) None of the choices are correct.

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Definitions:

Population Proportion

The fraction of members in a group that possess a particular characteristic, often expressed as a percentage of the total population.

Confidence Interval

An assortment of values, from sampled evidence, which possibly contains the value of an unknown parameter of the population.

Estimator

An estimator refers to a statistic used to estimate the value of a population parameter based on sample data.

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is actually true, typically denoted by alpha (α).