Practice question
A real-estate dealer maintains subdivision lots as inventory for sale to its customers. It sells one lot through an isolated deed and argues that this single deed converts the lot to a capital asset. The lot remained inventory until sale. Which is correct?
- It remains ordinary on these facts; the inventory and ordinary customer-sale character control.
- It becomes capital because each deed covers only one lot.
- It becomes capital because the buyer is an individual.
- It is tax-exempt because there is only one deed.
- The seller can elect its asset classification solely by the deed's wording.
Legal references
- NIRC, Section 39(A)(1); https://lawphil.net/statutes/repacts/ra1997/ra_8424_1997.html
- Revenue Regulations 7-2003, Section 2; https://elibrary.judiciary.gov.ph/thebookshelf/showdocs/10/40237
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