Discussion
Selling an asset for more than its book value produces
Answer: D
Correct answer: a taxable gain
Selling above book value means more depreciation was charged than the asset actually lost, so the excess is recaptured and taxed. Selling below book value gives a deductible loss for the same reason in reverse. Book value is not a valuation, so a gain or loss on disposal is the normal case rather than a sign of error.
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