Required information[The following information applies to the questions displayed below.]Aruna, a sole proprietor, wants to sell two assets that she no longer needs for her business. Both assets qualify as 51231assets. The first is machinery and will generate a $10,000 $1231 loss on the sale. The second is land that will generate a$7,000 $1231 gain on the sale. Aruna's ordinary marginal tax rate is 32 percent.Note: Input all amounts as positive values.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 onAruna's tax liability for each year?Aruna's tax willAruna's tax willincreasedecreasein year 1 byin year 2 by$$7,0007,000

A section 1231 gain is defined as the difference between a section 1231 property's tax basis and its…

Answered: b. Assuming that Aruna sells the land…

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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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? Aruna's tax will Aruna's tax will increase decrease in year 1 by in year 2 by $ $ 7,000 7,000