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prob016 - of the planned buildings was viable The property...

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Problem 16 (Text: Ch. 4, 7) The appellant company was incorporated in 1950 with broad charter powers to engage in the real estate business. The objects of the company included the power to buy, sell, subdivide and dispose of properties. Over a period covering about fifteen years, the company purchased various properties in the Toronto area, holding some as investments and reselling others. To the date of the case, the company had sold twelve properties. Two were sold at large profits because good offers were received. The appellant’s two principal shareholders had a history of extensive dealing in real estate. In three purchases during a four-year period, the appellant assembled a parcel of land in a Toronto suburb with the intention of erecting buildings on the property for rental purposes. This would be done if the surrounding area developed to the extent that rental
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Unformatted text preview: of the planned buildings was viable. The property was resold at a substantial profit nine years later. It had been listed for sale with a real estate corporation, wholly owned by the president of the appellant, and had remained undeveloped from the time of purchase to the time of sale. When the Minister taxed the profit as income, the appellant contended that its profit was a capital accretion from the realization of an investment. Required : Analyze the facts of this case thoroughly by considering all of the factors that have been developed by the courts to determine whether the receipt involved in the sale of the property was one of income or capital. Draw a reasoned conclusion from your analysis....
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