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.

1. a.What gain does Fontenot realize on the sale?
2. b.WhatistheamountandcharacterofthegainthatFontenotmustrecognizeintheyearofsale(ifany)andeachofthetwosubsequentyears?(Hint:UsetheInternalRevenueCodeandstartwith453;pleasegiveappropriatecitations.)

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: