All of the following assets are capital assets, except
- A personal automobile
- IBM stock
- A child's bicycle
- Personal furniture
- Used car inventory held by a car dealer

Concept Introduction:
The term capital asset is used in the calculation of capital gain or loss of the taxpayer. A capital gain or loss is calculated on the sale of capital assets. The income tax law has given an exclusive definition ofcapital assets.
To choose:The assets not considered as capital assets.
Answer to Problem 1MCQ
e.
Explanation of Solution
Explanation for correct answer:
A used car inventory held by a car dealer is a stock in trade is not covered in the definition of a capital asset. Hence option e is correct.
Explanation for incorrect answers:
a. A personal automobile is covered in the definition of capital assets. Hence this option is not correct.
b. Shares or stocks are covered in the definition of capital assets. Hence this option is not correct.
c. A child’s bicycle is covered in the definition of capital assets. Hence this option is not correct.
d. Personal furniture is covered in the definition of capital assets. Hence this option is not correct.
Want to see more full solutions like this?
Chapter 4 Solutions
Income Tax Fundamentals 2020 (with Intuit Proconnect Tax Online)
Additional Business Textbook Solutions
Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
Intermediate Accounting (2nd Edition)
Horngren's Accounting (12th Edition)
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Principles of Economics (MindTap Course List)
- Determine the overhead allocation rate if the allocation is made basedarrow_forwardStevenson Corporation reported a pretax book income of $500,000 in 2022. Included in the computation were favorable temporary differences of $60,000, unfavorable temporary differences of $25,000, and favorable permanent differences of $50,000. What is the book equivalent of taxable income for Stevenson Corporation?arrow_forwardSaxbury Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: Direct Materials Direct Labor Average Cost per Unit $5.30 $3.65 Variable Manufacturing Overhead $1.50 Fixed Manufacturing Overhead $3.90 Fixed Selling Expense $0.75 Sales Commissions $0.50 Variable Administrative Expense $0.50 Fixed Administrative Expense $0.60 If the selling price is $22.90 per unit, what is the contribution margin per unit sold?arrow_forward
- Accounting 12arrow_forwardPlease provide correct answerarrow_forwardAn asset's book value is $19,000 on December 31, Year 5. The asset has been depreciated at an annual rate of $4,000 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $16,000, the company should record: a. A loss on sale of $3,000. b. Neither a gain nor a loss is recognized in this type of transaction. c. A gain on sale of $3,000. d. A gain on sale of $3,000. e. A loss on sale of $3,000.arrow_forward
- I want answerarrow_forwardOn December 31, Strike Company decided to sell one of its batting cages. The initial cost of the equipment was $215,000 with accumulated depreciation of $185,000. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $30,000. What is the amount of the gain or loss on this transaction? a. Gain of $30,000 b. Loss of $30,000 c. No gain or loss d. Cannot be determinedarrow_forwardWhat is the level of its accounts receivable?arrow_forward
- Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
