Alpha Sold Machinery That It Used in Its Business to Beta

question 120

Multiple Choice

Alpha sold machinery that it used in its business to Beta, a related entity, for $39,500. Beta used the machinery in its business. Alpha bought the machinery a few years ago for $50,500 and has claimed $29,500 of depreciation expense. What is the amount and character of Alpha's gain?

• A)$18,500 ordinary income under §1239.
• B)$10,000 ordinary gain and $8,500 §1231 gain.
• C)$18,500 §1231 gain.
• D)$18,500 capital gain.
• E)None of the choices are correct.

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