Oregon Tax Consultants Practice Exam 2026 – Complete Study Resource

When personal property is sold for less than its tax basis, it typically results in a potentially deductible loss. The basis of an asset generally represents its original cost plus any improvements, minus any depreciation taken. If the sale price is lower than this basis, the owner may incur a capital loss.

This loss can be utilized to offset capital gains from other transactions in the current tax year. If capital losses exceed capital gains, it may be possible to deduct the excess loss against ordinary income, subject to specific limitations. Therefore, the correct understanding of selling personal property for less than its basis is that it can lead to a financial benefit through a tax-deductible loss, making it potentially advantageous for minimizing tax liability.

There are considerations that may prevent some losses from being deductible, such as if the property sold was a personal-use asset, but in general, selling at a loss does create potential for tax benefits. Other choices, such as taxable gain or additional taxes owed, would apply in situations where property is sold for more than its basis or in certain transactions involving gains, not losses. Thus, the conclusion that such a sale could result in a potentially deductible loss is accurate.