Question:

Assume a 40% tax rate.

The asset was purchased 2 years ago for $198,000 and is being depreciated under MACRS using a 5-year recovery period.

Recovery year	3 years	5 years	7 years	10 years
1	33%	20%	14%	10%
2	45%	32%	25%	18%
3	15%	19%	18%	14%
4	7%	12%	12%	12%
5		12%	9%	9%
6		5%	9%	8%
7			9%	7%
8			4%	6%
9				6%
10				6%
11				4%
Totals	100%	100%	100%	100%

Required:

Calculate the firm's tax liability for each case.

a. The asset is sold for $217,800.

b. The asset is sold for $148,500.

c. The asset is sold for $95,040.

d. The asset is sold for $76,000.