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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13317
Experience:  15years with H & R Block. Divisional leader, Instructor
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I am trying to determine if a corporation is in the business

Customer Question

I am trying to determine if a corporation is in the business of buying and selling fee simple interest, oil & gas leases and ORRI, are those sales not just the sale of inventory. I realize if the property has been producing and they corporation was taking a depletion allowance it is probably the sale of a capital asset because the property had moved from inventory to capital asset status. Much like a company with inventory for sale converting an inventory to rental.
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.
Hello and thanks for trusting me to help you today. I am a tax adviser with over 20 years of experience.
The gain generally is capital gain (taxed at preferential tax rates),
except for recapture of prior depletion or depreciation deductions
(taxed at ordinary income rates).
These are assets of the corporation and not inventory.