Reference no: EM131895873

Question - Aruna, a sole proprietor, wants to sell two assets that she no longer needs for her business. Both assets qualify as §1231 assets. The first is machinery and will generate a $33,250 §1231 loss on the sale. The second is land that will generate a $8,200 §1231 gain on the sale. Aruna's ordinary marginal tax rate is 30 percent. (Input all amounts as positive values.)

a. Assuming she sells both assets in December of year 1 (the current year), what effect will the sales have on Aruna's tax liability?

b. Assuming that Aruna sells the land in December of year 1 and the machinery in January of year 2, what effect will the sales have on Aruna's tax liability for each year?