Discussion
A defender's market value is 40 000 and its book value 55 000. Selling it at a 30 per cent tax rate gives net proceeds of
Answer: A
Correct answer: 44 500
The asset sells for less than its book value, giving a loss of \( 55{,}000 - 40{,}000 = 15{,}000 \) and a tax saving of \( 0.30 \times 15{,}000 = 4{,}500 \). Net proceeds are therefore \[ 40{,}000 + 4{,}500 = 44{,}500. \] A loss on disposal is worth having in cash terms, since it shelters other income from tax.
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