In January of the current year, Wanda transferred machinery worth $207,500 (basis of $31,125) to a controlled corporation, Oriole, Inc., in a transfer that qualified under 351. Wanda had deducted depreciation on the machinery in the amount of $166,000 when she held the machinery for use in her proprietorship. Later during the year, Oriole sells the machinery for $197,125. Answer the following questions regarding the tax consequences to Wanda and to Oriole on the sale of the machinery.

1. Does Wanda recognize a gain or loss of any kind on the transfer of the machinery to Oriole?

A. LONG TERM CAPITAL GAIN

B. NO GAIN IS RECOGNIZED

C. ORDINARY INCOME UNDER 1245 RECAPTURE

D. ORDINARY LOSS

2. Which taxpayers, if any, will recognize a gain as a result of the subsequent sale of the machinery by Oriole?

A. ONLY WANDA

B. ONLY ORIOLE, INC.

C. BOTH WANDA AND ORIOLE, INC.

3. What is Oriole's basis in the machinery before the sale? $_______

4. What is Oriole's gain from the sale? $_______

5. Oriole has a gain is treated as ?

A. CAPITAL GAINS

B. ORDINARY INCOME UNDER 1245

C. ORDINARY INCOME UNDER 1250