1. Capital assets are typically investment-type assets and personal-use assets.

TRUE

FALSE

2.Capital gains are taxed at a preferential rate, while the total amount of a capital loss is applied against ordinary income.

TRUE

FALSE

3.What is the definition of capital asset.

a) Because this income has a higher tax rate.

b) Because taxpayers may not have the cash to pay the tax on this gains until they sell the investment, or Congress may want to stimulate the economy.

c) Because the tax basis of this asset is using the fair market value and the tax liability is reduced.

d) Because passive income is generally taxed at a preferential rate.