If the tax rate is 55 percent and the income of a company 650,000, then a depreciation deduction of $80,000 would result in tax savings of:

Question

Quizplus · Accepted Answer

The taxable income of the company after depreciation deduction would be: 
$650,000 - $80,000 = $570,000
Tax liability at a tax rate of 55% would be: 
$570,000 × 0.55 = $313,500 
Tax savings due to the depreciation deduction would be: 
$650,000 × 0.55 – ($650,000 - $80,000) × 0.55 = $357,500 – $313,500 = $44,000. 
Therefore, the correct answer is B) $44,000.

If the Tax Rate Is 55 Percent and the Income