Practice question
An individual operates a retail business but owns a separate home used exclusively as a personal residence. The home was never used in business, held as inventory, or held primarily for customer sale. Upon sale, an examiner argues that every property owned by any businessperson is necessarily ordinary. Resolve only this classification claim.
- Agree; business status makes all personal property ordinary.
- Disagree; the stated home falls outside the identified statutory exclusions and is a capital asset.
- Agree; personal occupancy is always commercial use.
- Disagree; all real estate is capital regardless of actual use.
- Agree; the buyer's intended future use controls the seller's prior character.
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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