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Good Evening,
I came across an MCQ where there are two issues which I don’t understand (Q29 Sept 16)
1) The company has revalued its corporate headquarters to from $2m to $2.5m
2) The company has revalued a sales office from $500k to $400k
What is the impact on the income tax expense? Tax rate 30%
The answer is: Income tax expense decreased by $30k
My question is: why do we ignore the corporate headquarters Revaluation.
I hope you can help with this question.
Thank you in advance
Chris
Do you not think that the bit that you missed out could have been material?
How about this extract from the question … “No depreciation had been charged on the sales office and any impairment loss is allowable for tax purposes.”
We’re not facing any tax implications on a revaluation increase for current income tax – we would be facing a deferred tax tax liability increase but no affect on income tax
But the question specifically tells us that an impairment is allowable for tax purposes
OK?
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