Carl Fenson of Winnipeg owned three taxicabs that operated for 24 hours a day (two shifts of 12 hours). Fenson worked one shift himself and hired drivers for the other shifts. At the time, in addition to the normal taxi licence, a special licence was required to deliver passengers to Winnipeg International Airport. This special licence was referred to as a “one way” licence because it could be used to deliver passengers to the airport but not to pick up customers there. The licences were issued for 10-year renewable terms.
In 20X1, Fenson purchased three additional airport licences for $10,000 each, even though he did not have vehicles for their use. He immediately resold two of the licences for $18,000 each to a relative. Shortly thereafter, he purchased a mini-van, assigned the third new licence to that vehicle, and rented the van with the licence to a third party.
In 20X3, Transport Canada converted all one-way licences to two-way licences. In response to an unsolicited offer, Fenson cancelled the van lease and sold the third licence for $45,000.
Required:
What type of income did Fenson earn from the licence sales? Explain.