Which of the following items is a capital asset in the hands of the taxpayer?
A)Taxpayer owns a 10-year old Harley-Davidson motorcycle.
B)Taxpayer owns a used car lot. He owns a 1962 Cadillac that is for sale on the lot.
C)Taxpayer owns a notebook computer that he carries to his clients for work purposes.
D)Taxpayer, a farmer, has a prize winning steer in his herd.
E)None of the above items are capital assets.

Question

Quizplus · Accepted Answer

A capital asset is property held for investment or productive use such as land, buildings, equipment, and vehicles. In this case, the Harley-Davidson motorcycle is a personal vehicle but it can be categorized as a capital asset since it is used mainly by the taxpayer for personal enjoyment and not for regular transportation.

Answer: B
 The 1962 Cadillac owned by the taxpayer, which is intended for sale on the used car lot, is considered a capital asset. The reason is that the car is intended for the production of income from the sale of a capital asset.

Answer: C, D, E
 The notebook computer is considered an ordinary asset since it is used primarily for work purposes and may be frequently replaced due to technological advancements. The livestock such as the farmer's steer is part of their inventory or stock in trade, and not considered a capital asset. Therefore, the correct answer is E.

Which of the Following Items Is a Capital Asset in the Hands