MGMT 127A Lecture Notes - Lecture 8: Accounts Receivable, Tax Bracket, Tax Avoidance
Document Summary
Don"t worry about depreciation recapture (step 1) go straight to step 2. Step 2: determine the treatment of the asset. Know the type of property- only 3 types. Include all assets that are not considered ordinary or. This includes all assets except inventory, a/r, artwork in the hands of the person who created it, and real property. Inventory: it wouldn"t make sense to have tax incentives to sell your inventory after a year, so it is considered ordinary, not capital. Accounts receivable: you generate a/r by selling things like inventory. Literary and artistic works in the hands of the person who created it: this is inventory to the artists. Real property (both depreciable and non depreciable) and depreciable personal property used in the business. Depreciable personalty: things like machines, equipment, cars, trucks. Real property: things like factories, land, buildings property. You must hold it long term to be considered 1231. Gets treated as ordinary if it is a net loss.
