Which of the following is classified as a taxpayer's capital asset?

A capital asset is defined primarily by its nature and how it is used. In this context, the taxpayer's house is classified as a capital asset because it is a personal residence that is held for personal use rather than for business or trade purposes. This distinction is crucial because capital assets are typically subject to different tax treatment when sold compared to assets used in a trade or business.

When a taxpayer sells their personal residence, they may qualify for a capital gains exclusion, meaning that they can exclude a portion of the gain from the sale from their taxable income, provided certain conditions are met. This favorable tax treatment further emphasizes the classification of a personal residence as a capital asset.

In contrast, real estate used in a trade and depreciable property in a trade are considered business assets, which do not have the same treatment. Supplies used in a trade are also not categorized as capital assets because they are inventory or items consumed in the production of goods and services, rather than held for investment or personal use. Thus, the taxpayer's house stands out as a capital asset due to its function as a personal residence.