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Unformatted text preview: Platt owns land that is operated as a parking lot. A shed was erected on the lot for the related
transactions with customers. With regard to capital assets and Section 1231 assets, how should these
assets be classified?
Section 1231 Shed
Section 1231 CPA-02061
Choice "d" is correct. Because the parking lot and the shed constitute real estate and depreciable assets
used in a trade or business, they are not capital assets per the definition below.
Note: The parking lot and shed will fall under Section 1231 (provided they are used in the business over
12 months) and possibly Section 1250 and 1245, respectively, upon sale of the assets.
Capital assets are defined as all property held by the taxpayer except:
1. Property normally included in inventory or held for sale to customers in the ordinary course of
2. Depreciable property and real estate used in business.
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- Fall '10
- The Land