Which of the following statements regarding investments in real property is FALS

Question

Which of the following statements regarding investments in real property is FALSE?

An investor in undeveloped land can choose to capitalize interest expense incurred to purchase the land to tax basis rather than taking an annual tax deduction

Gain on the sale of investment land is treated as capital gain, unless the taxpayer is engaged in a business for which the land is treated as inventory

Improvements made to undeveloped land and subdivision of a large tract into smaller parcels are factors supporting the conclusion that a taxpayer is engaged in a business and the land is inventory

Income received from an investment in rental real estate is treated as capital gain

An investor in undeveloped land can choose to capitalize interest expense incurred to purchase the land to tax basis rather than taking an annual tax deduction

Gain on the sale of investment land is treated as capital gain, unless the taxpayer is engaged in a business for which the land is treated as inventory

Improvements made to undeveloped land and subdivision of a large tract into smaller parcels are factors supporting the conclusion that a taxpayer is engaged in a business and the land is inventory

Income received from an investment in rental real estate is treated as capital gain

Explanation / Answer

Income received from investment in rental real estate is income from investments, expenses can be deducted to arrive at net income. But it is not treated as capital gain.

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