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IRS Code 1221 (Links to an external site.) defines Capital Asset, but it does not...

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Accounting

IRS Code 1221 (Links to an external site.) defines Capital Asset, but it does not give us a clear definition of what capital asset is; it defines capital asset by stating what is NOT a capital asset. Thus, a capital asset is anything that is not listed on the definition. Please review the code IRC Code 1221 (Links to an external site.) and answer the following questions:

1. What is the benefit of classifying an asset as a Capital Asset?

2. Under IRC 1221(a), it lists some items that are NOT capital assets. What do they have in common?

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