A$.$ Red Company sold a piece of machinery used in its business for $$40,000.$ The machine had been purchased several years ago for $$32,000.$ At the time the machinery was sold, the accumulated depreciation was $$26,000,$ and its tax basis was $$6,000.$

Sec. $12310\%/15\%/20\%$ capital gain:

Sec. $1245$ ordinary recapture gain: