Inspired by B428, Frank Frenzy enters the real estate business as a sole propiet
ID: 2798807 • Letter: I
Question
Inspired by B428, Frank Frenzy enters the real estate business as a sole propietor. He gets his sales agent license and handles 20 sales his first two years. Along the way he buys and sells several properties in his own name. In March of the next year he is talking with his accountant, Gertrude Greenshades. The real estate market has been rising and every sale Frank made resulted in a "gain." "I'll get taxed at a lower rate because I held the properties for more than a year, right?" he says to Gertrude. Which of the following is MOST correct?
A. Frank will get capital gains treatment since he has his real estate license and that is a seperate business.
B. Frank won't get capital gains treatment because he must hold properties for at least five years.
C. Frank will get capital gains treatment because each property was purchased for investment purposes.
D. Frank probably won't get capital gains treatment if he bought and sold several properties because it may mean he is in the business of buying and selling property and thus it is his stock in trade.
Explanation / Answer
Option A is incorrect because the condition will not result in capital gains treatment
Option B is incorrect because capital gains can be attained for a period less than 5 years also
Option C is incorrect because such a condition will result in normal business income
Option D is correct and most apt