Coastal Shipping Corporation has decided to sell one of its vessels for $1 million.
This vessel is part of the Class 7 (15 percent) CCA pool, and Coastal had it built three years ago at a cost of $1.2 million. Coastal's tax rate is 25 percent. Coastal uses 10 percent as its cost of capital.
a. If the Class 7 UCC at the start of the year in question was $2 million (and this was the only disposal), what would be the tax consequences of the sale of the vessel?
b. If the Class 7 UCC at the start of the year of the sale was $0.8 million, what would be the tax effect of the sale?
c. If the UCC at the start of the year was $0.6 million and this was the last vessel in the pool, what would be the tax effects?