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Tax effect of transaction

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A firm is selling an existing asset for $5000. The asset when purchased cost $10,000, was depreciated under MACRS using a five-year recovery period and has been depreciated for four full years. If the assumed tax rate is 40% on ordinary income and capital gains, the tax effect of this transaction is:

A. $0 tax liability

B. $1,160 tax liability

C. $ 1,320 tax liability

D. $2.000 tax liability

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From the table of MACRS for 5-year property, the depreciation rates for first four years are ...

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