Brandon, an individual, began business four years ago and has never sold a 1231 asset. Brandon owned each of the assets for several years. In the current year, Brandon sold the following business assets:

AssetOriginal CostAccumulated DepreciationGain/LossMachinery$ 30,000$ 7,000$ 10,000Computers10,0006,000(2,000)Building90,00020,000(2,000)

Assuming Brandon's marginal ordinary income tax rate is 32 percent, what effect do the gains and losses have on Brandon's tax liability?

Multiple Choice

• $7,000 ordinary income, $1,000 1231 loss, and $1,920 tax liability.
• $6,000 ordinary income and $1,920 tax liability.
• $7,000 1231 gain and $2,240 tax liability.
• $7,000 1231 gain and $1,050 tax liability.
• None of the choices are correct.