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10 views2 pages

Notes

Uploaded by

wayiso koche
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Capital assets: are significant pieces of property or investments owned by an

individual, business, or government that have a useful life of more than one year and
are used in operations to generate value or income. These assets can include both
tangible and intangible assets. Here's a breakdown of capital assets:
1. Types of Capital Assets:
 Tangible Capital Assets:
o Land: This includes property owned for use in operations, such as real estate
used for business or investment purposes.
o Buildings: Commercial buildings, factories, warehouses, and other structures.
o Machinery and Equipment: Industrial machinery, vehicles, computers, and
other physical equipment used in production or operations.
o Infrastructure: Public or private infrastructure such as roads, bridges, water
systems, etc.
 Intangible Capital Assets:
o Patents: Legal rights granted for inventions or designs.
o Trademarks: Distinctive symbols, names, or logos representing a company
or product.
o Goodwill: The value of a business's reputation and customer relationships.
o Software: Proprietary software used in business operations.
o Licenses and Franchises: Rights to operate a business or offer services
under a brand name.
2. Capital Assets for Individuals:
 For individual taxpayers, capital assets often refer to investments such as stocks,
bonds, real estate (other than your primary residence), artwork, and collectibles.
When these assets are sold, the profit or loss is referred to as a capital gain or
capital loss.
3. Capital Assets for Businesses:
 For businesses, capital assets are items used for long-term operational purposes.
They are generally not intended for sale during normal business operations.
 Capital assets are usually depreciated over time, except for land, which does not
depreciate.
4. Capital Gains and Losses:
 When a capital asset is sold for more than its purchase price, the profit is a capital
gain. If sold for less, it is a capital loss.
 Tax laws typically provide special treatment for capital gains, with different tax rates
for short-term and long-term gains.
5. Examples of Capital Assets:
 A company purchasing a factory for manufacturing.
 A homeowner selling an investment property.
 An artist selling a piece of artwork they have held for several years.
 A business acquiring software for internal operations.
Capital assets are essential in both personal finance and business operations, and they play
a crucial role in wealth-building and economic activity.

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