Four years ago, Firm RD paid $468,000 for 12 acres of undeveloped land. This year, the firm sold the land for $1 million. What is the character of RD’s $532,000 recognized gain under each of the following assumptions?
a. RD improved the land by adding roads and utilities, then subdivided the land into 36 one-third-acre tracts that RD held for sale to local builders.
b. RD made no improvements to the land and sold the entire 12 acres to a Japanese purchaser.