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Home > UA Law > Akron Law Journals > AKRONTAXJOURNAL > Vol. 6 (1989)

 

Abstract

This article consists of six sections. The first section briefly indicates the economic significance of the correct classification of property as either a capital or an excluded asset. In the second section, the definition of a capital asset and the list of properties specifically excluded from the definition are presented and analyzed. The analysis demonstrates how the present formulations of the definition of an excluded asset can be given a broad and a narrow interpretation. The third section discusses how the Corn Products decision was conventionally construed to be based on a broad interpretation of the definition of an excluded asset. The fourth section shows how post-Corn Products judicial developments relied on the conventional construction for expanding the list of excluded properties to properties not specifically excluded from the definition of a capital asset. Rather than going into detail about each type of property to which the definition of an excluded asset was applied, corporate securities are used as a surrogate for all of them. The fifth section presents the Supreme Court's attempt to limit the application of the definition of an excluded asset to those properties specifically excluded from the definition of a capital asset and to inventory related futures contracts. Through an analysis of the Arkansas Best decision, this section also demonstrates that expansion of the list of excluded properties is not precluded by the Arkansas Best decision. The last section points out some policy issues Congress needs to consider if it reformulates the Code's definition of a capital asset and the properties specifically excluded from the definition.

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