Trudo Corporation has a building that it needs to sell or exchange because of growth in its business.If Trudo sells the building, it will have a gain of $450,000.What is the amount of taxes that Trudi will avoid paying if it can exchange the building? The corporation has $1,000,000 of taxable income from operations for the current year.
A)$94,500
B)$153,000
C)$175,500
D)$450,000

Question

Quizplus · Accepted Answer

The taxes Trudo will avoid paying on the $450,000 gain from exchanging the building instead of selling it can be calculated based on the corporate tax rates applicable to its taxable income. Assuming a flat corporate tax rate of 21% (which is the U.S. federal corporate tax rate as of the last update), the tax on the gain would be 21% of $450,000, which equals $94,500. Therefore, by exchanging the building instead of selling it, Trudo Corporation would avoid paying $94,500 in taxes.

Trudo Corporation Has a Building That It Needs to Sell