If an asset is sold for less than its book value, the loss on the sale may be used to offset ordinary operating income provided the asset is used in the business.

Question

Quizplus · Accepted Answer

This is known as a loss on disposal and is recognized on the income statement. The amount of the loss can be used to offset ordinary income as long as the asset was used in the business. However, if the asset was held for investment purposes, the loss can only be used to offset capital gains.

If an Asset Is Sold for Less Than Its Book