Choice "A" is correct. Because the parking lot and the shed constitute real estate and depreciable assets used in a trade or business, they are not capital assets per the definition below.Note: The parking lot and shed will fall under Section 1231 (provided they are used in the business over 12 months) and possibly Section 1250 and 1245, respectively, upon sale of the assets. Capital assets are defined as all property held by the taxpayer, except:

1. Property normally included in inventory or held for sale to customers in the ordinary course of business.

2. Depreciable property and real estate used in business.

3. Accounts and notes receivable arising from sales or services in the taxpayer’s business.

4. Copyrights, literary, musical or artistic compositions.

5. Treasury stock.