Aruna, a sole proprietor, wants to sell two assets that she no longer needs for her business. both assets qualify as §1231 assets. the first is machinery and will generate a $10,000 §1231 loss on the sale. the second is land that will generate a $7,000 §1231 gain on the sale. aruna’s ordinary marginal tax rate is 30 percent.

1. a. assuming she sells both assets in december of year 1 (the current year), what effect will the sales have on aruna’s tax liability? aruna's tax liability will (blank) by (blank)

2. assuming that aruna sells the land in december of year 1 and the machinery in january of year 2, what effect will the sales have on aruna’s tax liability for each year?

aruna's tax in year 1 by
aruna's tax in year 2 by