Question

Which of the following is considered a capital asset for federal income tax purpose?

a) Accounts receivable acquired in the course of your business
b) Land used in your business
c) Furniture and equipment used in your business
d) Stock in trade
e) Automobile held for personal use

Answer 1

b) Land used in your business

Step-by-step explanation:

For tax purposes the IRS classifies capital assets as those that have a productive life of more than one year and is not normally sold during the course of a business's operations.

Capital assets are a type of production cost, they are used in the production process to generate revenue.

They are expensed over the useful life of the asset in the form of depreciation.

Land is an example of capital assets for the purpose of federal income tax.

It provides the site of production and is not an item that is sold in the short run. Rather it is used over several years.