Question

Our tax laws encourage taxpayers to ____ assets that have appreciated in value and ____ assets that have declined in value.a. sell; keep.b. sell; sell.c. keep; sell.d. keep; keep.e. None of these.

Answer 1

Answer:

The correct answer is letter "A": sell; keep.

Explanation:

Only when an asset is sold it is possible to find out if we took profit or loss from it. The after-tax gains are higher than the selling price when the taxpayer sells assets that have decreased in value because the loss lowers taxes due. On the other hand, when a valued asset is sold, the after-tax proceeds are lower than the selling price due to the gain tax.