The tax status of an asset refers to whether the asset is a capital asset, a § 1231 asset, or an ordinary asset.

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The tax status of an asset can be categorized as a capital asset, a § 1231 asset (which includes business property and depreciable property used in a trade or business), or an ordinary asset (such as inventory or property held primarily for sale to customers in the ordinary course of a trade or business). Knowing the tax status of an asset is important for determining how any gains or losses from the sale or disposal of the asset will be taxed.

The Tax Status of an Asset Refers to Whether the Asset