Step $1$: Read & Review

Using the Income Tax Act, other course materials, and the Internet, review the following:

Review the important factors that are considered in distinguishing inventory from capital assets. Read Income Tax Interpretation Bulletin IT$-459$Adventure or Concern in the Nature of Trade$,$ which provides Canada Revenue Agency$$s interpretation of activities that produce business income.

Read Income Tax Interpretation Bulletin IT$-218$R$,$ "Profit, Capital Gains and Losses from the Sale of Real Estate, Including Farmland and Inherited Land and Conversion of Real Estate from Capital Property to Inventory," which provides Canada Revenue Agency$$s interpretation of the factors to consider when determining if real estate is considered inventory or a capital asset.

Step $2$: Forum Questions: Post your response to the discussion board $-60\%$

The distinction between capital assets and inventory is important since the disposition of these two types of property will produce different sources of income that result in different tax consequences. As you have previously learned, business income $($or losses$)$ from the sale of inventory is fully taxable $($or fully deductible$)$ for tax purposes. This differs from capital gains $($or capital losses$),$ which are only one$-$half taxable $($or one$-$half deductible against capital gains$)$ for tax purposes.

Post your response to the following items on the discussion board:

A corporation can earn various sources of income. List examples of passive sources of income for a corporation. What is the difference between these sources of income and a corporation$$s $$active business income?$$

List and briefly describe each of the factors to be considered in determining whether property should be considered capital asset or inventory. Be sure to include an explanation of which of the factor$($s$)$ are most important in this determination.

Based on your review of Income Tax Interpretation Bulletin IT$-218$R$,$ briefly describe one example of when a disposition of real estate would result in business income and one example of when a disposition of real estate would result in a capital gain or capital loss.

Step $3$: Respond to two other classmates' posts $-40\%$

Review your classmates$$ posts, paying particular attention to the two real estate disposition examples provided. Respond to their posts by applying the factors developed by the courts and described in IT$-218$R$,$ which should be considered in determining if the sale of real property results in business income or capital gains, to one of their examples to verify that the disposition would result in business income or capital gains.