Find what is the amount and character of alpha gain

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Problem 1: Alpha sold machinery, which it used in its business, to Beta, a related entity, for $40,200. Beta used the machinery in its business. Alpha bought the machinery a few years ago for $49,800 and has claimed $30,200 of depreciation expense. What is the amount and character of Alpha's gain?

Option 1: $20,600 ordinary income under §1239.
Option 2: $10,000 ordinary gain and $10,600 §1231 gain.
Option 3: $10,600 ordinary gain.
Option 4: $20,600 capital gain.
Option 5: None of the choices are correct.

Reference no: EM132990402

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