Podcast
Questions and Answers
A property purchased for future use in business is classified as an ordinary asset regardless of unforeseen circumstances.
A property purchased for future use in business is classified as an ordinary asset regardless of unforeseen circumstances.
True
Once a property has been classified as business property, its character changes if it is no longer actively used.
Once a property has been classified as business property, its character changes if it is no longer actively used.
False
Real properties that are used or have been used in trade are classified as ordinary assets.
Real properties that are used or have been used in trade are classified as ordinary assets.
True
A depreciable asset remains classified as an ordinary asset even if it has not been depreciated during ownership.
A depreciable asset remains classified as an ordinary asset even if it has not been depreciated during ownership.
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Real properties used by an exempt corporation in operations are classified as ordinary assets.
Real properties used by an exempt corporation in operations are classified as ordinary assets.
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A property that has been unused for two years prior to a taxable transaction is still classified as ordinary if the owner is not in the real estate business.
A property that has been unused for two years prior to a taxable transaction is still classified as ordinary if the owner is not in the real estate business.
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Properties subject to involuntary transfers maintain their classification without change.
Properties subject to involuntary transfers maintain their classification without change.
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Study Notes
Asset Classification Rules
- A property purchased for business use remains an ordinary asset, even when business plans change.
- Discontinuing the active use of a property does not change its classification as a business asset.
- Real properties used, currently being used, or previously used in a taxpayer's trade are classified as ordinary assets.
- A depreciable asset remains an ordinary asset regardless of depreciation status, even if fully depreciated or depreciation was not claimed.
- Real properties used by exempt corporations in their exempt operations are considered capital assets.
- For taxpayers not in the real estate business, unused real properties for two years prior to a taxable transaction are considered capital assets.
- Property transferred through sale, barter, exchange, inheritance, donation, or declaration of property dividends retains its original asset classification.
- Involuntary transfers of real properties, such as expropriation or foreclosure sales, do not affect the asset classification.
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Description
Test your knowledge on asset classification rules regarding business use properties. This quiz covers how different scenarios affect asset classification, including depreciation and transfers. Dive into the intricacies of ordinary and capital assets related to real properties in business contexts.
