XYZ Corporation has decided to sell one of its windmills for $5 million. This building is part of the Class 3 (5 percent) CCA pool, and XYZ had it built five years ago at a cost of $4.5 million. XYZ's tax rate is 25 percent. Zebra uses 12 percent as its cost of capital.
a. If the Class 3 UCC at the start of the year in question was $12 million (and this was the only disposal), what would be the tax consequences of the sale of the windmill?
b. If the Class 3 UCC at the start of the year of the sale was $4 million, what would be the tax effect of the sale?
c. If the UCC at the start of the year was $6 million and this was the last windmill in the pool, what would be the tax effects?