Dakota LLC purchases medical device components from a third party manufacturer. Dakota has developed proprietary software which enhances the value of the medical device by allowing it to perform additional functions. Dakota LLC leases their machines, bundled with the software, to various hospitals and universities. Dakota has adopted a policy that they will not sell these medical devices to customers. However, through the years, Dakota has sold about 40% of its medical devices to its customers, either because the products were damaged by the customer during the lease term or they were obsolete and could no longer be leased to a new customer. Dakota LLC has reported these sales as 1231 gains; however, upon audit, the IRS determined that Dakota was holding the machines for resale (as inventory) and therefore is not eligible for 1231 treatment. Determine whether you believe the sale of medical devices qualify for 1231 treatment.