Final answer:
Artworks must be capitalized if considered investment assets. Collectibles provide enjoyment and possible resale profit, though high returns are not guaranteed. Proprietors in proprietary colonies had governance responsibilities, not just profit collection.
Step-by-step explanation:
The statement that artworks are not required to be capitalized if the proceeds from the sale of collectibles are used to acquire the same collectibles seems to be a misunderstanding. Tax treatment, including capitalization and depreciation of artwork, depends on various factors, including whether the artwork is considered an investment or held for personal use. According to tax guidelines, if collectibles such as paintings, fine wine, jewelry, antiques, or baseball cards are seen as investment assets, they must be capitalized. Collectibles provide returns both in the form of enjoyment and potentially, a higher reselling price in the future. However, while their prices can fluctuate, collectibles are not expected to consistently yield high returns over time.
In the context of a proprietary colony, the proprietors had responsibilities beyond just collecting profits. They were involved in overseeing the management and governance of the colony. Therefore, the claim that proprietors have no responsibilities except to collect profits is false.