Indicate Whether Each of the Following Assets Are Capital Assets,Sec

question 91

Essay

Indicate whether each of the following assets are capital assets,Sec.1231 assets,or ordinary income property (property which,if sold,results in ordinary income).Assume that all of the property is held for more than one year.
a.XYZ Corporation owns land used as an employee parking lot.How is the parking lot classified for tax purposes?
b.Montana Corporation owns land held as an investment.How is the land classified for tax purposes?
c.John,a self-employed electrician,owns an automobile he uses strictly for personal use.How is the automobile classified for tax purposes?
d.Jan,a self-employed contractor,owns a truck she uses exclusively in her trade or business.How is the truck classified for tax purposes?
e.Leslie owns an office building where her accounting practice is located.What is the classification of the building?
f.Yvonne owns a computer for use in her job as a sales representative.She does not use the computer for personal purposes.How is the computer classified for tax purposes?

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Definitions:

Prevention Cost

Costs incurred to prevent defects in products or services, including training, quality control, and equipment maintenance.

Internal Failure Cost

Costs associated with defects found before a product or service is delivered to the customer, such as scrap and rework expenses.

Value-Added Activity

An activity that is needed to meet customer requirements.

Preventive Maintenance

Preventive maintenance involves regularly scheduled inspections, service, and repairs of equipment and facilities to prevent unexpected breakdowns and extend their useful life.