Question

Where the depreciable assets is transferred after 36 months there will be:
(A) Short-term capital gain
(B) Long-term capital gain
(C) Short-term capital gain or loss
(D) Long-term capital gain or loss

Answer 1

Explanation:

C}. Short - team captain gain or loss

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Answer 2

Option C) Short-term capital gain or loss is correct.

Where the depreciable assets is transferred after 36 months there will be short-term capital gain or loss.

Depreciable assets:

• A depreciable asset is a piece of property that generates revenue over the course of more than one reporting period.
• To prevent lower-cost purchases from being categorised as depreciable assets, a capitalization restriction may also be used.
• An eligible expense is first recorded as an asset, then over time, its cost is gradually written down to lower its book value.
• Depending on how it is classified, an asset's depreciation term will vary.

As an illustration:

• A purchase that is classed as a car may be written off over a period of five years, whereas a purchase that is classified as furniture may be written off over a period of seven years.
• Buildings often depreciate over a period of 20 to 30 years, which is a significantly longer time frame.
• Since it is believed that land has an indefinite lifespan, it does not depreciate at all.

If long-term capital assets have taken advantage of depreciation, the capital gain must be computed in the manner specified by Section 50, and the capital gains tax will be assessed as though the long-term capital assets were the source of the capital gains.

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