What is Capital asset?
In short
A capital asset is most property a taxpayer holds, such as stocks, bonds and personal-use assets, except items the Internal Revenue Code excludes, such as inventory, business receivables and depreciable property or real estate used in a business.
Key takeaways
- Gains on capital assets held more than one year are long-term and taxed at lower rates.
- Individuals can deduct up to $3,000 a year of net capital loss against ordinary income and carry the rest forward indefinitely.
- Losses on personal-use capital assets, such as a family car, aren't deductible.
Where it's tested
REG: Property Transactions: Gains, Losses & Like-Kind Exchanges — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An individual has net capital losses exceeding capital gains for the year. What amount may be deducted against ordinary income?