Question

Alex owns several assets: a personal residence, a piece of land purchased as an investment, a diamond necklace, and a commercial building used exclusively for his business operations. For tax purposes, which of these is NOT considered a capital asset?

Answer 1

The commercial building used exclusively in his business is NOT a capital asset. Under IRC §1221, property used in a trade or business (e.g., business real or depreciable property) is excluded from the definition of a capital asset (gains/losses on its disposition are handled under §1231/recapture rules). The personal residence, investment land, and diamond necklace are capital assets.