A corporation is selling an existing asset for $2000. The asset, when purchased, cost $10,000, was being depreciated under MACRS using a 5-year recovery period and has been depreciated for 4 full years. If the assumed tax rate is 25 percent on ordinary income and capital gains, the tax effect of this transaction is:

The depreciation rates for the assets under 5 year MACRS are as follows

20% for year 1, 32% for year2, 19% for year 3, 12% for year 4, 12 % for year 5, and 5% for year 6.

If tax effect is a cash inflow enter it as a positive number

If tax effect is a cash outflow enter it as a negative number