Question

If an existing asset is sold at a gain, and the gain is taxable, then the after-tax proceeds from this transaction would be equal to: The pre-tax proceeds plus taxes on the gain. Net proceeds from the sale less the after-tax gain on the sale. Net proceeds from the sale less the taxes paid on the gain. Net proceeds from the sale plus the taxes paid on the gain. Net proceeds from the sale plus the after-tax gain on the sale.

Answer 1

If an existing asset is sold at a gain, and the gain is taxable, then the after-tax proceeds from this transaction would be equal to:

Net proceeds from the sale less the taxes paid on the gain.

Step-by-step explanation:

An illustration is given below. Company A received $70,000 from the sale of an Office Equipment with a tax basis of $40,000. The capital gains tax rate is 20%. How much would be the after-tax proceeds? The net proceeds minus the tax basis would result in the capital gains of $30,000. Then, the capital gains tax equals $6,000 ($30,000 * 20%). Therefore, the after-tax proceeds would be $70,000 minus $6,000, which is equal to $64,000.