An in-place machine with B = $120,000 was depreciated by MACRS over a 3-year period. The machine was sold for $60,000 at the end of year 2 when the company decided to import the item that required the use of the machine. In year 2, GI = $1.4 million and OE = $500,000. Determine the tax liability in year 2 if Te = 35%.

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A:

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