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

question 48

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:

Power

In statistics, the probability that a test will correctly reject a false null hypothesis; essentially, the test's sensitivity to detect an effect when there is one.

Likelihood Of Error

The probability or chance that a statistical conclusion may be incorrect or misleading.

Mean

An average of a set of numbers, calculated by dividing the sum of all the values by the number of values.

Z Score

A numerical calculation indicating how a specific value's distance from the group's average is expressed in multiple standard deviations.