What does capital asset mean on the CPA exam?
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Capital asset. For tax, almost everything a taxpayer owns EXCEPT inventory, receivables, and depreciable or real property used in a trade or business. Gain on it is capital rather than ordinary.
Defined against Sec. 1221.
Related terms
- partnership interest: A partner's stake in the partnership itself, distinct from any interest in its underlying assets.
- capital loss: Loss on the sale of a capital asset.
- capital assets: In GOVERNMENTAL reporting, long-lived assets such as land, buildings and infrastructure.
- hot assets: A partnership's unrealized receivables and inventory.
- real property: Land and anything permanently attached to it, such as a building.
- trade or business: An activity carried on regularly, continuously and with a profit motive.