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.
Answer:
A. $20,000 ordinary income under §1239.