Aruna, a sole proprietor, wants to sell two assets that she no longer needs for her business. Both assets qualify as 1231 assets. The first is machinery and will generate a $30,500 1231 loss on the sale. The second is land that will generate a $12,800 1231 gain on the sale. Arunas ordinary marginal tax rate is 32 percent. positive values.

a. Assuming she sells both assets in December of year 1 (the current year), what effect will the sales have on Arunas tax liability?

b. Assuming that Aruna sells the land in December of year 1 and the machinery in January of year 2, what effect will the sales have on Arunas tax liability for each year?