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This question is about employer.
What are hot assets?
Hot assets are business assets that must be considered ordinary income for tax purposes. The term was created by the IRS to describe specific types of business revenue.
The term hot asset refers to two primary sources of business income. Both inventory and accounts receivable represent unrealized income as they have yet to be sold or received by the business. When a business liquifies its assets, either because of a dissolving partnership or outright sale, there is the potential to report substantial losses and therefore garner the partner(s) substantial tax breaks.
The rule governing hot assets states that all inventory and outstanding accounts receivables must be considered ordinary income and logged as a positive rather than a negative. An example of this would be a warehouse full of inventory that a business partner hoped to write off as a loss and therefore lower their taxable income. The value of the inventory, as a hot asset, instead will be considered income based on its sale value. The same applies to outstanding accounts receivable as they will eventually result in realized income.
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