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payments constitutes a capital asset within the meaning of
section 1221.
Section 1221 provides the following definition of the term
“capital asset”:
SEC. 1221. CAPITAL ASSET DEFINED.
For purposes of this subtitle, the term “capital
asset” means property held by the taxpayer (whether or
not connected with his trade or business), but does not
include-–
(1) stock in trade of the taxpayer or other
property of a kind which would properly be
included in the inventory of the taxpayer if on
hand at the close of the taxable year, or property
held by the taxpayer primarily for sale to
customers in the ordinary course of his trade or
business;
(2) property, used in his trade or business,
of a character which is subject to the allowance
for depreciation provided in section 167, or real
property used in his trade or business;
(3) a copyright, a literary, musical, or
artistic composition, a letter or memorandum, or
similar property, held by-–
(A) a taxpayer whose personal efforts
created such property,
(B) in the case of a letter, memorandum,
or similar property, a taxpayer for whom such
property was prepared or produced, or
(C) a taxpayer in whose hands the basis
of such property is determined, for purposes
of determining gain from a sale or exchange,
in whole or part by reference to the basis of
such property in the hands of a taxpayer
described in subparagraph (A) or (B);
(4) accounts or notes receivable
acquired in the ordinary course of trade or
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Last modified: May 25, 2011