Section 7: Property and Special Property Tax Transactions

Question 1

Ordinary Income Assets

Answer 1

• current assets of the business
• assets that were acquired with the intention of being sold
• Hot Assets:
  
  • Inventory
  • Receivables
  • Self-created artistic work

Question 2

Section 1231 Assets

Answer 2

• Assets whose sale was incidental to the business
• Held over 1 year
  
  • Loss is ordinary loss (4797)
  • Gain is LT Capital Gain (Sch D)
• Less than 1 yr
  
  • Ordinary

Question 3

Holding Periods

Answer 3

• Inherited Assets - classified as LT
• Non-Business Bad Debts - write offs are ST

Question 4

How to net capital assets

Answer 4

• Net Long term (10 gain)
• Then, net short term (3 loss)
• Then net LT and ST (7 gain)