Aruna, a sole proprietor wants to sell two assets that she no longer needs for her business. Both assets qualify as section 1231 assets. The first machinery will generate a $10000 section 1231 loss on the sale. The second is land that will generate a $7000 section 1231 gain on the sale. Aruna's ordinary marginal tax rate is 32 percent.

Assuming that Aruna sells the land in December of year 1 and the machinery in January of year 2, what effect have on Aruna's Tax liability for each year?