Publication 544 |
2001 Tax Year |
Noncapital Assets
A noncapital asset is property that is not a capital asset. The
following kinds of property are not capital assets.
- Property held mainly for sale to customers or property that
will physically become part of merchandise for sale to customers. This
includes stock in trade, inventory, and other property you hold mainly
for sale to customers in your trade or business. Inventories are
discussed in Publication 538,
Accounting Periods and
Methods.
- Accounts or notes receivable acquired in the ordinary course
of a trade or business for services rendered or from the sale of any
properties described in (1).
- Depreciable property used in your trade or business or as
rental property (including section 197 intangibles defined later under
Dispositions of Intangible Property). This applies even if
the property is fully depreciated (or amortized). Their treatment is
discussed in chapter 3.
- Real property used in your trade or business or as rental
property. This applies even if the property is fully
depreciated.
- A copyright; a literary, musical, or artistic composition; a
letter; a memorandum; or similar property (such as drafts of speeches,
recordings, transcripts, manuscripts, drawings, or
photographs)--
- Created by your personal efforts,
- Prepared or produced for you (in the case of a letter,
memorandum, or similar property), or
- Acquired from a person who created the property or for whom
the property was prepared under circumstances (for example, by gift)
entitling you to the basis of the person who created the property, or
for whom it was prepared or produced. Letters and memorandums
addressed to you and letters or memorandums prepared by persons under
your administrative control are considered prepared for you even if
you do not review them.
- U.S. Government publications you got from the government for
free or for less than the normal sales price or that you acquired
under circumstances entitling you to the basis of someone who got the
publications for free or for less than the normal sales price.
- Any commodities derivative financial instrument held by a
commodities derivatives dealer unless it meets both the following
requirements.
- It is established to the satisfaction of the IRS that the
instrument has no connection to the activities of the dealer as a
dealer.
- The instrument is clearly identified in the dealer's records
as meeting (a) by the end of the day on which it was acquired,
originated, or entered into.
- Any hedging transaction that is clearly identified as a
hedging transaction by the end of the day on which it was acquired,
originated, or entered into.
- Supplies of a type you regularly use or consume in the
ordinary course of your trade or business.
Property held mainly for sale to customers.
Stock in trade, inventory, and other property you hold mainly for
sale to customers in your trade or business are not capital assets.
Inventories are discussed in Publication 538.
Business assets.
Real property and depreciable property used in your trade or
business or as rental property (including section 197 intangibles
defined later under Dispositions of Intangible Property)
are not capital assets. Their treatment is discussed in chapter
3.
Letters and memorandums.
Letters, memorandums, and similar property (such as drafts of
speeches, recordings, transcripts, manuscripts, drawings, or
photographs) are not treated as capital assets if your personal
efforts created them or if they were prepared or produced for you. Nor
is this property a capital asset if your basis in it is determined by
reference to the person who created it or the person for whom it was
prepared. For this purpose, letters and memorandums addressed to you
are considered prepared for you. If letters or memorandums are
prepared by persons under your administrative control, they are
considered prepared for you whether or not you review them.
Commodities derivative financial instrument.
A commodities derivative financial instrument is a commodities
contract or other financial instrument for commodities (other than a
share of corporate stock, a beneficial interest in a partnership or
trust, a note, bond, debenture, or other evidence of indebtedness, or
a section 1256 contract) the value or settlement price of which is
calculated or determined by reference to a specified index (as defined
in section 1221(b) of the Internal Revenue Code).
Commodities derivative dealer.
A commodities derivative dealer is a person who regularly offers to
enter into, assume, offset, assign, or terminate positions in
commodities derivative financial instruments with customers in the
ordinary course of a trade or business.
Hedging transaction.
A hedging transaction is any transaction you enter into in the
normal course of your trade or business primarily to manage any of the
following.
- Risk of price changes or currency fluctuations involving
ordinary property you hold or will hold.
- Risk of interest rate or price changes or currency
fluctuations for borrowings you make or will make, or ordinary
obligations you incur or will incur.
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