When a business ceases to operate and its inventories are disposed of, a gain on the inventories will be treated as a capital gain unless an election is made by the selling taxpayer.

Question

Quizplus · Accepted Answer

The gain on the disposal of inventories is generally treated as ordinary income, not capital gain, because inventories are considered ordinary assets in the course of business operations.

When a Business Ceases to Operate and Its Inventories Are