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

question 29

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 equipment 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 these.

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Definitions:

Founder Effect

A reduction in genetic variation that occurs when a new population is established by a very small number of individuals from a larger population.

Isolated Populations

Groups of organisms that are separated from exchanging genetic material with other organisms of the same species, often leading to speciation.

Antibiotic-resistant Genes

Genes in bacteria that confer resistance to antibiotics, making infections difficult to treat.

Cassette

In genetics, a segment of DNA that contains a gene or genes, often used in genetic engineering to insert new genes into organisms.