Stepnoski Corporation is considering a capital budgeting project that would involve investing $216,000 in equipment with an estimated useful life of 4 years and no salvage value at the end of the useful life. Annual incremental sales from the project would be $630,000 and the annual incremental cash operating expenses would be $480,000. A one-time renovation expense of $80,000 would be required in year 3. The project would require investing $20,000 of working capital in the project immediately, but this amount would be recovered at the end of the project in 4 years. The company's income tax rate is 30% and its after-tax discount rate is 10%.

The company uses straight-line depreciation on all equipment.

The income tax expense in year 3 is: