Question

When an individual owns a home for personal or ons assets for investme or business use these can be characterized as personal capital of Section 1231 assets. Please read the linked PowerPoint et focus on the sides that are marked in red) and for book page 11-6 through 11 9 (eluked folders 1-7 for screenshots Which of the three characterizations is most favorable to the taxpayer, and why I Go back to your answer to Property MC question 10 (copied below) and indicate my new wees you ined after completing part 1 Just as a mide, these three characterization only apply to businesses owned directly by an individual, not for corporations. Also, if an individual owns ordinary assets for personal use, rather than business use, those assets are based if they are sold at again, but do not result in a deduction if soldatalous. For example, if you buy a car for personal use, you cannot depreciate the car and the loss in value of the car is deductible upon wale However, if the a ppreciate is value (suppose it becomes a collectibleyou must pay the taxes on the realized when you sell the ca 110) Joe Hall owns a limousine for use in his personal service business of anting passengers t o the limousine d e 540.000. , Hallows personal residence and furnishings that together cost him $200.000. Hall's capital amount to A $320.000 B. 5.200.000 C$40.000 D 30 A The limousine is depreciable bune property and not a capital Cape are any property red by the pow er of the concedi his or her business, but not inventory, depreciable business property, w y sed in a trade or business, copyrights and artistic composition created by the own counts and receivable and certain US government publi q ued at reduced com Personal property, such as the personal residence and f ishings ($200.000. are capital aces. The limousine is depreciable business property and not a capital C. The m ain is depreciable business property and not a capital seu the personal residence and tonishings are capitals D. Hall has cap

Answer 1

Capital assets are any property held by the taxpayer (whether or not they are connected with his or her business), but not inventory, depreciable business property, real property used in a trade or business, copyrights or artistic compositions created by the owner, accounts and notes receivable, and certain U.S. government publications acquired at reduced cost. (Section 1221)

Personal-use property, such as the personal residence and furnishings ($ 280,000) are capital assets. The limousine is depreciable business property and not a capital asset, but the personal residence and furnishings are capital assets.

Hence the answer for the above question is Option B ($ 280,000)