The corporation’s regular activities involved the purchase of particular (redacted) types of equipment or vehicles that were damaged and/or out-of-use in order to restore them and rent them, following which, it would sell them at a gain over its cost. Some were sold without even having been rented previously. It also purchased items for parts only, which were disassembled so that the parts could be used in refurbishing the other items.
Before finding that the items (both those purchased for parts and those purchased for refurbishment and sale) were inventory rather than depreciable property, the Directorate noted, regarding the latter, the three criteria in IT-102R2, para. 4 for the sale of leased property not constituting income from the sale of inventory, including (in subpara. 4(c),) that the properties “are normally sold for an amount that is less than their cost to the taxpayer,” and stated that this condition was not satisfied since the items were sold at a profit.