What is a Capital Asset?

Most property you own and use for personal purposes, pleasure, or investment is a capital asset. For example, your house, furniture, car, stocks, and bonds are capital assets.

A "capital asset" is any property held by you except the following.

• Stock in trade or other property included in inventory or held mainly for sale to customers.
• Accounts or notes receivable for services performed in the ordinary course of your trade or business or as an employee, or from the sale of stock in trade or other property held mainly for sale to customers.
• Depreciable property used in your trade or business, even if it is fully depreciated.
• Real estate used in your trade or business.
• Copyrights, literary, musical, or artistic compositions, letters or memoranda, or similar property:

• (a) created by your personal efforts;
• (b) prepared or produced for you (in the case of letters, memoranda, or similar property); or
• (c) that you received from someone who created them or for whom they were created, as mentioned in (a) or (b), in a way (such as by gift) that entitled you to the basis of the previous owner.

• U.S. Government publications, including the Congressional Record, that you received from the government, other than by purchase at the normal sales price, or that you got from someone who had received it in a similar way, if your basis is determined by reference to the previous owner's basis.
• Certain commodities derivative financial instruments held by a dealer. See section 1221(a)(6).
• Certain hedging transactions entered into in the normal course of your trade or business. See section 1221(a)(7).
• Supplies regularly used in your trade or business.