The profits from the sale of assets that are depreciated and sold to a related party will be taxed at ordinary income tax rates rather than the lower capital gains rates.
The tax courts have ruled in a case involving two related corporations that transferred assets and reported capital gains on the transaction. The IRS recharacterized the gain because the same person owned more than 50 percent of the stock of each corporation. The Tax Court agreed with the Service that the firms were related and the capital gain treatment was incorrect (Fish, TC Memo, 2013-270).
This is a very common error made by tax preparers. Double-check with your tax advisor or a tax attorney before you sign your tax return if you have a related party sale.