Capital assets are often associated with equipment used for business. But this is a rampant mistake in the definition. Capital assets cover all kinds of property that hold a certain value, whether used for business or personally. As such, they could be anything of interest to other investors or buyers.
Capital assets are also not limited by their very nature. They can be intangible, fixed or circulating, or moveable and immovable. It is easy to associate them with business equipment because of the high market value of machinery and other equipment crucial to business operations. Meanwhile, individuals are often unaware that they are likely to own capital assets, even if they are not entrepreneurs. Here are examples:
- Books: Paper might be flimsy, but knowledge is not. Books treated as capital assets do not apply only to libraries, which are in the business of preserving these. As long as they are meant to last more than a year, books are as valuable a capital asset as anything else.
- Jewelry: This is easy enough to imagine. Not everyone has glittering armoires, but invaluable heirloom pieces are common, especially as they are passed across generations. That put away jade set which the owners have likely forgotten could hold a lot more value. The sale of jewelry, moreover, is often subject to capital gains tax.
- Furniture: There’s a reason these are insured, and some homeowners maintain them. Furniture pieces are either collectibles or deployed for more utilitarian purposes. Either way, it’s easy to put stock in them.
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