In the context of noting that the Act contemplates two basic types of property (capital property, and inventory), so that real estate held as an adventure in the nature of trade was assimilated to the second category, Major J stated (at paras. 31-32):
The basic scheme of dividing property into one of two broad classes under the Income Tax Act is further assisted by ss. 13(7) and 45(1) . These sections make specific provision for the conversion of real estate from capital property to inventory and vice versa in particular circumstances. As IT- 218R explains, these circumstances arise only when the taxpayer's intention and use of the property change subsequent to the initial purchase. Sections 13(7) and 45(1) provide for the transfer to be made by means of a deemed disposition and reacquisition at fair market value. The deemed reacquisition at the time when the taxpayer's intention with respect to the property is materially changed reflects the fact that the category of the property is determined according to the taxpayer's intention at the time of acquisition.
… [I]f an item of property is not relevant to income in a particular year, it does not convert to capital property unless it meets the requirements of ss. 13(7) and 45(1).