What gain does fontenot realize on the sale

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Problem - Fontenot Corporation sold some machinery to its majority owner Gray (an individual who owns 60 percent of Fontenot). Fontenot purchased the machinery for $100,000 and has claimed a total of $40,000 of depreciation expense deductions against the property. Gray will provide Fontenot with $10,000 of cash today and provide a $100,000 note that will pay Fontenot $50,000 one year from now and $50,000 two years from now.

a. What gain does Fontenot realize on the sale?

b. What is the amount and character of the gain that Fontenot must recognize in  the year of sale (if any) and each of the two subsequent years? (Hint: Use the Internal Revenue Code and start with §453; please give appropriate citations.)

Structure your memo in the format as provided in your textbook for an internal research memo, which must include the following sections: FACTS:

ISSUE:

AUTHORITIES:

CONCLUSION:

ANALYSIS:

Reference no: EM131734463

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