A corporation has decided to replace an existing machine with a newer model. The old machine had an initial purchase price of $35,000, and has $20,000 in accumulated depreciation. If the 40% tax rate applies to the corporation and the old asset can be sold for $10,000, what is the tax on sale when the old machine is sold?

A.

loss of $2,000

B.

refund of $2,000

C.

loss of $4,000

D.

no effect