Question

Steven operates a restaurant as a sole proprietor and files a Schedule C for the business activity. Which of the following assets, all of which he owns, qualify as a capital asset for Steven?

A. The portable sound system used only in the restaurant to play “theme music”.

B. None of the assets listed in a, b or c qualify as capital assets for Steven.

C. The interest-bearing savings account used only to keep the restaurant’s excess cash.

D. The tables and chairs used only in the restaurant.

Answer 1

None of the assets owned by Steven qualifies as a capital assets because of the following reasons:

A) Portable sound systems-These are only used in business and are real and depreciable assets.As per IRS the assets on which depreciation is allowed is not considered as capital assets.

C) Interest bearing savings account in which restaurants excess cash is kept-This does not qualify as capital asset because it is not capable of being sold or disposed.

D)Tables and Chairs used only in business-These are only used in business and are real and depreciable assets.As per IRS the assets on which depreciation is allowed is not considered as capital assets.