An office building that produces an annual (above-line) NOI of $200,000 will be purchased for $1,000,000. The purchase will be financed by a 30-year, 12% mortgage loan with monthly payment and Loan-to-value ratio of 75%. Up-front financing cost is about 2% of the loan. In the first year, capital expenditure is $20,000; depreciation is $24,615. Tax rate on income from comparable risk investment is 30%. What is the tax liability in the first year?

Select one:

a. $31,509

b. $31,289

c. $32,268

d. $31,019