Type of Assets Flashcards
Mineral and similar natural resources deposits
are considered to be capital assets when sold in place.
The sale of mineral deposits which are removed and sold in units, results in ordinary income
Government bonds sold by an individual investor
are capital assets, so the sale would be reported as a capital gain
equipment sold is presumed to be business equipment subject to depreciation and
therefore classified as Section 1231 assets subject to Section 1245 recapture
Inventory
is specifically excluded from capital assets
real property that is subdivided and sold by a dealer
is considered to be like inventory in the hands of the dealer and therefore excluded from capital assets
Section 1221
defines a capital asset by exclusion
All property used in a taxpayer’s trade or business is excluded from being a capital asset
Section 1231
Depreciable property used in a trade or business and Must be held over 1 year
Generally, a net Section 1231 loss is ordinary loss and a net Section 1231 gain (except for depreciation recapture) is long-term capital gain
Section 1245
only applies to the sale of personal property at a gain (Business use)
Section 1250
applies to the sale of real property at a gain (Business Use)
Capital assets
are investment property and personal-use property
Capital assets does Not include
Property held for resale (inventory)
Real or depreciable property used in a trade or business
Accounts or notes receivable acquired in normal business operations
Capital gains on long-term investments in collectibles
are taxed at 28%.
While non collectibles sold at a gain are taxed at 15% or 20%
Ordinary Gains on Business Assets
Are reported on form 4797
Business assets include all furniture, equipment, and machinery used in a business venture
