Brandon, an individual, began business four years ago and has sold 1231 assets with $5,750 of losses within the last 5 years. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets:

Asset	Original Cost		Accumulated Depreciation		Gain/Loss
Machinery	$	31,500	$	8,500	$	10,750
Land		55,000		0		27,500
Building		120,000		35,000		(20,000	)

Assuming Brandon's marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon's tax liability? Use Dividends and Capital Gains Tax Rates for reference.

Multiple Choice

a. $18,250 ordinary income, $5,840 tax liability.

b. $18,250 1231 gain and $2,738 tax liability.

c. $4,000 1231 gain, $14,250 ordinary income, and $5,160 tax liability.

d. $14,250 1231 gain, $4,000 ordinary income, and $3,418 tax liability.

e. None of the choices are correct.