A Corporation Is Selling an Existing Asset for $1,700

question 112

Multiple Choice

A corporation is selling an existing asset for $1,700. The asset, when purchased, cost $10,000, was being depreciated under MACRS using a five-year recovery period, and has been depreciated for four full years. If the assumed tax rate is 40 percent on ordinary income and capital gains, the tax effect of this transaction is ________.

• A) $0 tax liability
• B) $840 tax liability
• C) $3,160 tax liability
• D) $3,160 tax benefit

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Definitions:

Physical Harm

Physical Harm entails injury or damage to the body of a person caused by external forces or substances.

Vicarious Liability

A legal concept where one party is held responsible for the actions or negligence of another party, often seen in employer-employee relationships.

Tortious Conduct

Behavior that causes injury or harm to another, making the actor liable to civil legal action.

Reasonable Care

A legal standard that requires individuals to act with the caution and prudence that a reasonable person would use in similar circumstances, to prevent harm to others.