Question
(Capital Gains Tax) The R. T. Kleinman Corporation is considering selling one of its old assembly machines. The machine, purchased for $40,000 five years ago,
(Capital Gains Tax) The R. T. Kleinman Corporation is considering selling one of its old assembly machines. The machine, purchased for $40,000 five years ago, had an expected life of 10 years and an expected salvage value of zero. Assume Kleinman uses simple straight-line depreciation, creating depreciation of $4,000 per year, and could sell this old machine for $45,000. Also assume a 34% marginal tax rate. a. What would be the taxes associated with this sale? b. If the old machine were sold for $40,000, what would be the taxes associated with this sale? c. If the old machine were sold for $20,000, what would be the taxes associated with this sale? d. If the old machine were sold for $17,000, what would be the taxes associated with this sale?
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