Remco builds custom log homes and is organized as a corporat

Remco builds custom log homes and is organized as a corporation. Remco sells about 500 homes each year. After one of their customers forfeited their deposit, they were left with a completed log home that is now listed for sale. They expect to sell the property within the next 9 months to a year. When sold, describe whether the property would likely be categorized capital gain or ordinary income, and why

Solution

Remco builds custom log homes and is organised as a corporation. Remco is doing business of building and selling homes. After one of their customer forfeited their deposit, Remco left with a home that is listed for sale.

Remco sells about 500 homes each year. This shows that Remco has Ordinary Business of selling homes and therefore Income earned from selling home will be considered as Ordinary Income only and no Capital gain will be levied.