[startupcfo]

I thought a capital asset was something you use for your trade or business (real estate, machinery) that has a useful life over 1 year. My suspicion is confirmed here: https://www.investopedia.com/terms/c/capitalasset.asp

However, I’m interpreting IRC 1221 that machinery/real estate is NOT a capital asset

Which is it?

BEC - 87 | 02/28
REG - 70 | 06/10, REMATCH | 08/30
AUD - XX | 09/10
FAR - XX | 12/10

[.]

Property held for investment use and personal use, are capital assets.

Section 1231 assets are depreciable property used in a trade/business and realty that have been owned for more than a year.

FAR - June 2016 - 88
REG - July 2016 - 89
AUD - Aug 2016 - review phase currently
BEC - Sep 2016 -

Wiley CPA Excel & Ninja MCQ

[Anonymous]

My advice: Always know whether u are referring to US GAAP or the IRC.

Their definitions may be slightly different or the same for Capital Assets – I'm assuming different depending on the code section. “Investopedia” has good general knowledge, but remember we use US GAAP or the IRC. If you are referring to the IRC, then it has very strict authoritative literature with exceptions for certain codes.

I know I did not answer your question, but I wanted you to be careful about interpreting non-authoritative literature such as Investopedia – even though it could be right in some cases.

How that helps 🙂

[Anonymous]

Investopedia was useful many times in my studies; however, its information is more related to financial statements (which is what you'd be looking at when considering investments), so more related to GAAP.

Taxes are a whole different ball-game. IRC 1221 (a) (2) “property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business” – I think this includes machinery and real estate both. Of course, given it's IRS, you'd want to check IRS definitions, but just off the top of my head, I'm pretty sure machinery is depreciable, and the general definition of “real property” would include real estate.

So, in this case I think IRC and GAAP agree about machinery and real estate. However, cpa4928's point was very good – and was my first thought as well – that taxes and financial statements can use the same terms very differently.

[GitRDone2017]

This explains the topic in tax terms:

https://www.irs.gov/publications/p544/ch02.html#en_US_2015_publink100072479

"Confidence is going after Moby Dick in a rowboat and taking tartar sauce with you" - Zig Ziglar
Ninja book + Ninja MCQ + Roger
AUD Oct 2016
FAR Nov 2016
BEC ?
REG?

[Anonymous]

…and this is why I shouldn't try to read anything from the IRS before 8am, before coffee, before…well…better yet, never. After looking at GitRDone's link, I look back at IRC1221, and say that I totally missed the “but does not include” at the end of 1221 (a) in my post from early this morning. So, my explanation of why real estate and machinery fit within the definition of 1221 (a) (2) was right, but my application that it meant they were capital assets was wrong. Oy. Reminds me why I'm glad I'm not in tax, and why I need coffee before IRS regs, always. 😐

[Skynet]

For a guy who can find a good woman that can cook, clean, works 9-5, and raise the kids is a “Capital Asset” : )

[Anonymous]

^ Lol @ Skynet. I think She is a Capital Asset with an infinite life! In other words, She does not depreciate in value. I once dated this chick named “Land” who had these qualities. She went by the nickname “Property Held for Investment.” Lol

[Author]

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