Hillary is in the leasing business and faces a marginal tax rate of 35 percent.She has leased equipment to Whitewater Corporation for several years.Hillary bought the equipment for $50,000 and claimed $20,000 of depreciation deductions against the asset.The lease term is about to expire and Whitewater would like to acquire the equipment.Hillary has been offered two options to choose from:

Option Details

Like-kind exchange : Whitewater would provide Hillary with like-kind equipment.The like-kind equipment has a fair market value of $35,000.

Installment sale : Whitewater would provide Hillary with two payments of $19,000.She would use the proceeds to purchase equipment that she could also lease.

Ignoring time value of money, which option provides the greatest after-tax value for Hillary, assuming she is indifferent between the proposals based on nontax factors?