Hill Corporation is in the leasing business and faces a marginal tax rate of 21 percent. It has leased a building to Whitewater Corporation for several years. Hill bought the building for $150,000 and claimed $20,000 of depreciation deductions against the asset. The lease term is about to expire and Whitewater would like to acquire the building. Hill has been offered two options to choose from:

Ignoring time value of money, which option provides the greatest after-tax value for Hill, assuming it is indifferent between the proposals based on nontax factors? 

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Option Details Whitewater would provide Hill with a like-kind building. The like-kind building has a fair market value of $135,000. Like-kind exchange Installment sale Whitewater would provide Hill with two payments of $69,000. It would use the proceeds to purchase another building that it could also lease.