n.
A long-term asset, such as land or a building.
capital asset
| Dictionary: capital asset |
n.
| 5min Related Video: capital asset |
| Investment Dictionary: Capital Asset |
A long-term asset that is not bought or sold in the regular course of business.
Investopedia Says:
Examples include land, buildings, machinery, etc. Generally, these are assets that can't be turned into cash quickly.
Related Links:
Learn about the components of the statement of financial position and how they relate to each other. Reading The Balance Sheet
Learn what it means to do your homework on a company's performance and reporting practices before investing. Advanced Financial Statement Analysis
| Business Dictionary: Capital Assets |
In general: property with a relatively long life; fixed Asset in a trade or business.
Taxation: property held for investment by the taxpayer that, when sold, has been subject to special tax treatment (as Capital Gains or Capital Losses). A net long-term capital gain is taxed at a maximum of 20% to an individual for sales after May 6, 1998. A 10% rate applies to individuals in the 15% tax bracket. Inventory, property held for resale, real or personal property used in a trade or business, copyrights in certain instances, and certain U.S. Government obligations are not capital assets.
The Internal Revenue Code does not define what a capital asset is=only what it is not (IRC i1221). Also the tax code definition of capital asset differs significantly from the definition in economics.
| Real Estate Dictionary: Capital Asset |
An asset defined in Section 1221 of the Internal Revenue Code that once received favorable tax treatment upon sale. Excludes Inventory property held for resale, property used in a trade or business, copyrights in certain instances, and certain U.S. Government obligations.
Example: The dwelling that one owns and lives in, investment land, a limited partnership interest, or securities held for investment are capital assets.
| Accounting Dictionary: Capital Asset |
1. Asset purchased for use in production over long periods of time rather than for resale. It includes (a) land, buildings, plant and equipment, mineral deposits, and timber reserves; (b) patents, goodwill, trademarks, and leaseholds; and (c) investments in affiliated companies.
2. In taxation, property held by a taxpayer, except cash, inventoriable assets, merchandise held for sale, receivables, and certain intangibles.
3. Fixed Asset usually consisting of tangible assets such as plant and equipment and intangible assets such as a patent.
| Law Encyclopedia: Capital Asset |
This entry contains information applicable to United States law only.
Property held by a taxpayer, such as houses, cars, stocks, bonds, and jewelry, or a building owned by a corporation to furnish facilities for its employees.
Excluded from capital assets are certain items stated in the Internal Revenue Code, for example (1) trade or business property subject to depreciation allowance under the tax laws; (2) real property used in trade or business; (3) certain categories of copyrighted materials and literary property; and (4) accounts or notes receivable acquired in the ordinary course of business.
The determination of what constitutes a capital asset is essential to the tax treatment of the profits from the sale of property as capital gains, which are taxed at a lower rate than ordinary income.
| Wikipedia: Capital asset |
The term capital asset has three unrelated technical definitions, and is also used in a variety of non-technical ways.
- In financial economics, it refers to any asset used to make money, as opposed to assets used for personal enjoyment or consumption. This is an important distinction because two people can disagree sharply about the value of personal assets, one person might think a sports car is more valuable than a pickup truck, another person might have the opposite taste. But if an asset is held for the purpose of making money, taste has nothing to do with it, only differences of opinion about how much money the asset will produce. With the further assumption that people agree on the probability distribution of future cash flows, it is possible to have an objective Capital asset pricing model. Even without the assumption of agreement, it is possible to set rational limits on capital asset value.[1]
- In governmental accounting, it is defined as any asset used in operations with an initial useful life extending beyond one reporting period.[2] Generally, government managers have a "stewardship" duty to maintain capital assets under their control. See International Public Sector Accounting Standards for details.
- In US tax accounting, it is defined as any property other than a list of exceptions. The main exceptions are anything held for sale, and any real estate or depreciable property used in business.[3] Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. If something is a capital asset for tax purposes, gains or losses on sale or disposition are capital gains or capital losses. For individuals, however, capital losses on property held for personal use are generally not deductible. See the IRS publication Tax Facts about Capital Gains and Losses for details.
Non-technical and ambiguous usage
A well-known financial accounting textbook[4] advises that the term be avoided except in tax accounting because it is used in so many different senses, not all of them well-defined. For example it is often used as a synonym for fixed assets[5] or for investments in securities.[4]
A common non-technical usage occurs when people ask that employees or the environment or something else be treated as a capital asset. In this context it means something managers have a responsibility to maintain, and to report changes in value as gains or losses.[6]
Capital assets should not be confused with the capital a financial institution is required to hold. This capital is computed from the right-hand side of the balance sheet while assets are found on the left-hand side. [4]
References
- ^ Eugene F. Fama and Merton H. Miller, The Theory of Finance, Holt Rinehart and Winston (1974).
- ^ Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, paragraph 19.
- ^ Internal Revenue Code Subchapter P, Section 1221, Capital Asset Defined.
- ^ a b c Clyde P. Stickney and Roman L. Weil, Financial Accounting, p. 622.
- ^ John Owen Edward Clark, Dictionary of International Accounting Terms, p. 98
- ^ David F. Robinson, "Human asset accounting", Long Range Planning, v. 7, i. 1, February 1974, Pp. 58-60.
See also
This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
Learn More
 | Internal Revenue Code |
| depreciation |
| capital gain |
Help us answer these
Post a question - any question - to the WikiAnswers community:
Copyrights:
 |
 | Dictionary. The American Heritage® Dictionary of the English Language, Fourth Edition Copyright © 2007, 2000 by Houghton Mifflin Company. Updated in 2007. Published by Houghton Mifflin Company. All rights reserved. Read more |
 |
| Investment Dictionary. Copyright ©2000, Investopedia.com - Owned and Operated by Investopedia Inc. All rights reserved. Read more |
 |
| Business Dictionary. Dictionary of Business Terms. Copyright © 2000 by Barron's Educational Series, Inc. All rights reserved. Read more |
|
| Real Estate Dictionary. Dictionary of Real Estate Terms. Copyright © 2004 by Barron's Educational Series, Inc. All rights reserved. Read more |
|
| Accounting Dictionary. Dictionary of Accounting Terms. Copyright © 2005 by Barron's Educational Series, Inc. All rights reserved. Read more |
 |
| Law Encyclopedia. West's Encyclopedia of American Law. Copyright © 1998 by The Gale Group, Inc. All rights reserved. Read more |
 |
| Wikipedia. This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Capital asset". Read more |
Related answers
- What makes an asset a capital asset?
- What are Capital Asset Purchases?
- What is the capital asset pricing model?
ADVERTISEMENT
Answer these
- How does capital asset pricing model help explain changing costs of capital?
- Is Working Capital a capital asset?
- What is capital asset?
Mentioned in
- capital gain
- Capital Loss
- Jensen Index (finance term)
- Long-Term Gain (finance term)
- Litchfield, P. W. (Quotes By)
- Put Option (business term)
- Risk Premium (business term)
- Asset (finance term)
- Business Property (business term)
- Recapture
- Capital Asset Pricing Model (CAPM) (business term)
- Holding Period (business term)
- Ordinary Income (finance term)
- Return of Capital (finance term)
|
