Capital Asset
Most property you own and use for personal purposes or investment is a capital asset. For example, your house, furniture, car, stocks, and bonds are capital assets. A capital asset is any property owned by you except the following.
Stock in trade or other property included in inventory or held mainly for sale to customers in the ordinary course of your trade or business. But see the TIP about certain musical compositions or copyrights, later.
Accounts or notes receivable: For services rendered in the ordinary course of your trade or business, For services rendered as an employee, or From the sale of stock in trade or other property included in inventory or 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.
A patent, invention, model, or design (whether or not patented); a secret formula or process; a copyright; a literary, musical, or artistic composition; a letter or memorandum; or similar property that is: Created by your personal efforts; Prepared or produced for you (in the case of a letter, memorandum, or similar property); or Received under circumstances (such as by gift) that entitle you to the basis of the person who created the property or for whom the property was prepared or produced. See section 1221(a)(3). But see the TIP about certain musical compositions or copyrights below.
A U.S. Government publication, including the Congressional Record, that you received: From the U.S. Government (or any governmental agency) for an amount other than the normal sales price, or Under circumstances (such as by gift) that entitle you to the basis of someone who received the publication for an amount other than the normal sales price.
Certain commodities derivative financial instruments held by a dealer and connected to the dealer’s activities as a dealer. See section 1221(a)(6) and (b)(1).
Certain hedging transactions entered into in the normal course of your trade or business. See section 1221(a)(7) and (b)(2).
Supplies regularly used in your trade or business.
You can elect to treat as capital assets certain musical compositions or copyrights you sold or exchanged. See Pub. 550 for details.