Ch. 8 - Property Disposition

Question 1

What are the 8 categories that are NOT Capital Assets?

Answer 1

1. Inventory
2. A/R or Notes Receivable
3. Supplies
4. Real or depreciable property (must be used for business purposes. Not the same as an investment property)
5. Copyrights, composition, property held by taxpayer and taxpayer efforts created it. (Ex: Sculpture)
6. Publications of the US Gov.
7. Commodities derivative financial investment
8. Hedging transaction properties

Question 2

What assets are classified under Sec. 1231?

Answer 2

1. Depreciable personalty & equipment & property
2. Real property (land)
3. Intangible business assets (patents, goodwill, etc.)

Question 3

What Sec. 1231 assets qualify for full recapture (Sec. 1245)?

Answer 3

1. Depreciable personalty (equipment)
2. Intangible business assets

-The amount of gain equal to depreciation or amortization will be treated as an ordinary gain and not a capital gain.

Question 4

What Sec. 1231 assets qualify for partial recapture (Sec. 1250)?

Answer 4

1. Depreciable realty
2. qualified improvement property
3. Other improvements

-Recapture will include the accelerated depreciation in excess of S.L.