Alpha Sold Machinery That It Used in Its Business to Beta

Multiple Choice

Alpha sold machinery that it used in its business to Beta, a related entity, for $40,400. Beta used the machinery in its business. Alpha bought the machinery a few years ago for $49,600 and has claimed $30,400 of depreciation expense. What is the amount and character of Alpha's gain?

A) $21,200 ordinary income under §1239.
B) $10,000 ordinary gain and $11,200 §1231 gain.
C) $21,200 §1231 gain.
D) $21,200 capital gain.
E) None of the choices are correct.