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Capital asset refers to all property that is held by a taxpayer fro sale to customers, excluding inventory, property used for business, and property held for resale in the ordinary business operations.
Capital assets used to receive favorable tax benefits upon sale.
For example, the house that a taxpayer lives in, land investments, investment securities, etc, are capital assets.
It should not be confused with capital expenditure.
Capital expenditure refers to improvements made to property that would have a lifespan exceeding one year.
They are items treated differently when preparing company accounts or operating accounts.