CAPITAL ASSET
Property held by a taxpayer, such as houses, cars,
stocks, bonds, and jewelry, or a building owned by
a corporation to furnish facilities for its employees.
Excluded from capital assets are certain
items stated in the INTERNAL REVENUE CODE,
for example (1) trade or business property sub-
ject 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.
