Tangible and Intangible Property

• Not all property is tangible. For instance, intellectual property, ideas and good will, which is the value of a business over and above its assets, are all intangible (incorporeal) property that can be owned, but lacks physical substance or existence.
  
  Government does not yet tax ideas or thoughts until the intangible property is conveyed, transferred or sold, at which point it becomes taxable. Once an idea is patented or copyrighted, such as with an invention or book, the idea becomes tangible and therefore can be monetized and the income generated from sales is taxed.
  
  

Real Property

• Real property, or real estate, is tangible property that is immovable. Things such as oil, gas, precious metals and standing timber are all part of the land. However, if standing timber is removed, it becomes tangible personal property.
  
  If you sell the timber, the sale is treated as a capital gain and not ordinary income. In addition, the taxation on the real property is based on the appraised value of the property and not on the assumed value of the timber or other natural resource on the property.
  
  

Tangible Personal Property

• Tangible personal property is essentially any property that can be moved. Some states tax tangible personal property. For instance, a farmer in a state with personal property tax may pay taxes on his vehicle, farm tractor and cattle.
  
  Other states have a tax on business personal property such as equipment, vehicles and computers. The method of taxation is based on a percentage of the value of the property.
  
  

Business vs. Individual Real and Tangible Property

• Regardless of whether we are speaking about a business or an individual, real and personal property are essentially the same thing. The primary difference between a business' property and an individual's property is the way in which they are taxed and the state in which the property is located. So if you are thinking of starting a business or buying that new speedboat, check your state laws on taxation because you may be facing a tax bill on your real and tangible personal property that you did not expect.