An unrealized loss on trading securities results in a deferred tax asset because the loss reduces pre-tax income but has no effect on taxable income.

Question

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When a company incurs an unrealized loss on trading securities, it reduces its pre-tax income but it does not affect its taxable income since the loss is not realized until the securities are sold. Therefore, the company can claim a deferred tax asset that reflects the tax benefits it will receive in the future when it can offset the loss against taxable income.

An Unrealized Loss on Trading Securities Results in a Deferred