Sale of an asset for less than book value creates an operating loss that effectively reduces the company's taxes by an amount equal to ____ times ____.
A) one-half the loss; the company's marginal tax rate
B) the loss; one minus the company's marginal tax rate
C) one-half the loss; one minus the company's marginal tax rate
D) the loss; the company's marginal tax rate

Question

Quizplus · Accepted Answer

The correct answer is D) the loss; the company's marginal tax rate. This is because the operating loss reduces taxable income, and the tax savings are equal to the loss multiplied by the company's marginal tax rate.

Sale of an Asset for Less Than Book Value Creates