Trade or business property
Article Abstract:
A question taken from the certified public accountant examination dealing with the classification of property as being either Section 1231 assets or capital assets is answered. The choice of answer is justified through a discussion of the Internal Revenue Code's (IRC) treatment of capital assets and Section 1231 Assets. The definition of capital assets in the IRC is outlined and then used as a way to distinguish Section 1231 assets, which generally refer to business assets that are not capital assets, but which can be sold to realize a capital gain. Section 1231 assets, as such, are unique in that if a net gain is registered on the sale of such assets, it is treated as a capital gain, whereas if the sale were to lead to a net loss, it would simply be treated as an ordinary deduction. In the case cited in the test question, the business property cited are Section 1231 assets.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1993
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New S corporation shareholder rules
Article Abstract:
An IRS examination question asks which of four options does not qualify as a shareholder of an S corporation. The choices are a resident of the US, an estate of a bankrupt individual, a trust held by an individual who is a US citizen and a partnership. The answer to this multiple-choice question is the last option, a partnership. Subchapter S allows the election to be taxed by shareholders of some small business corporations as if they were conducting their activities as partners in a partnership. The term 'small' in this context does not refer to the size or value of the corporation but to the number of shareholders. The Small Business Job Protection Act of 1996 revises the conditions that a small business corporation must meet to qualify for the S corporation election. Only the partnership does not meet the five requirements.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1996
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