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THE UNITED STATES TAX SYSTEM: AN OVERVIEW(a) Capital AssetsThe law excludes from consideration as capital assets the following:• Inventory• Stock in trade• Depreciable business property• Real business property• Copyrights and other artistic works (within certain guidelines)• Trade or business receivables• Government publications (within certain guidelines) 71Whether property is held by a person primarily for sale to customers in theordinary course of business (usually as inventory or stock in trade) or is a capitalasset is a question of fact. 72 Courts consider numerous factors in decidingthis issue; no one factor controls. 73 As is nearly always the case in tax matters,the taxpayer has the burden of proving that the property was not held for sale ina business. 74 The following factors are the ones usually taken into considerationin determining whether property is held primarily for sale to customers in theordinary course of a trade or business: the frequency and continuity of sales, theextent and substantiality of sales, the purpose for which the person acquiredand held the property, the time between purchase and sale, the extent ofimprovements made to facilitate sale, and the person’s advertising and promotionefforts. 75Despite the seemingly broad definition of a capital asset, and the limitedexceptions, the term has been construed to mean, as noted, investment propertythat tends to appreciate in value over time. Indeed, the Supreme Court held thatproperty seemingly within the statutory definition of a capital asset may beexcluded from that classification when the property is an integral part of the taxpayer’sbusiness and is not truly investment property. 76(b) Ordinary Income; Capital Gains and LossesHistorically, income has been divided into two major categories: ordinary incomeand capital gains. Ordinary income is the typical (ordinary) type(s) of income—wages and salaries, rent, dividends, interest, and the like. Capital gain, in contrast,is revenue generated by the transfer of a capital asset.71 Id.72 Pleasant Summit Land Corp. v. Commissioner, 863 F.2d 263 (3d Cir. 1988), aff’g on this issue 54 T.C.M.(CCH) 566 (1987); S&H, Inc. v. Commissioner, 78 T.C. 234 (1982).73 Biedenharn Realty Co. v. United States, 526 F.2d 409 (5th Cir. 1976).74 Welch v. Helvering, 290 U.S. 111 (1933).75 E.g., Pleasant Summit Land Corp. v. Commissioner, 863 F.2d 263 (3d Cir. 1988); Kaltreider v. Commissioner,255 F.2d 833 (3d Cir. 1958), aff’g 28 T.C. 121 (1957); Guardian Indus. v. Commissioner, 97 T.C. 308 (1991),aff’d without published opinion, 21 F.3d 427 (6th Cir. 1994). These factors were applied in a charitable givingcontext in Pasqualini v. Commissioner, 103 T.C. 1 (1994); see §§ 4.3, 4.4(a).76 Corn Prods. Ref. Co. v. Commissioner, 350 U.S. 46 (1955). 48