What does hot assets mean on the CPA exam?
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Hot assets. A partnership's unrealized receivables and inventory. They force ordinary income treatment on a sale or distribution that would otherwise produce capital gain.
Defined against Sec. 751.
Which CPA exam sections use hot assets?
Hot assets appears in 2 CPA exam sections: REG, TCP.
Related terms
- partnership interest: A partner's stake in the partnership itself, distinct from any interest in its underlying assets.
- ordinary income: Income taxed at the regular graduated rates rather than at preferential capital gain rates.
- capital asset: For tax, almost everything a taxpayer owns EXCEPT inventory, receivables, and depreciable or real property used in a trade or business.
- total assets: Everything the entity controls that is expected to produce future benefit, added up.
- capital assets: In GOVERNMENTAL reporting, long-lived assets such as land, buildings and infrastructure.
- average total assets: The average of opening and closing total assets, used wherever a period flow like sales is compared to a balance.