Excluded from capital assets are certain items stated in the INTERNAL REVENUE CODE, for example (1) trade or business property subject to depreciation allowance under the tax laws; (2) real property used in trade or business; (3) certain categories of copyrighted materials and LITERARY PROPERTY; and (4) accounts or notes receivable acquired in the ordinary course of business.
The determination of what constitutes a capital asset is essential to the tax treatment of the profits from the sale of property as capital gains, which are taxed at a lower rate than ordinary income.
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