13 (Ordinary Income)[1]

Inducements to enter trade tie that constituted a

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Inducements to enter trade-tie that  constituted a substantial change to  capital structure of taxpayer’s 
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business ( Dickenson ) Trading transactions and Trading transactions and     ordinary proceeds of a ordinary proceeds of a     business business § Gains flowing from trading transactions  or that represent the ordinary proceeds  or ordinary incidents of a business  activity are genearlly income: § Profit from trading in land ( Californian  Copper Syndicate Ltd v Harris ) § Profit from sale of a spinning plant  that was purchased with the intention  of quickly reselling it ( Edwards v  Bairstow ) § Profit from the sale of wheat scrip  purchased with the intention of selling  it at a profit ( Blockey )
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Realisation of capital Realisation of capital     assets vs venturing assets assets vs venturing assets     in trading activity in trading activity § Gains arising from the mere realisation  of a capital asset are generally capital: § Profit made by a company from the  sale of land it had mined for decades  and later developed ( Scottish  Australian Mining Co ) § Gains made from venturing an asset  into a trading activity are generally  income: § Profit from the sale of land that was  ventured into a land development  business ( Whitfords Beach Pty Ltd ) Carrying on a business Carrying on a business § Whether a business is being carried on 
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is a “question of fact and degree” § Factors in determining whether or not a  taxpayer is carrying on a business  include: § Scale and magnitude of activities § Whether it is carried out in a  systematic, commercial and regular  manner § Profit motive What constitutes a What constitutes a     business? business? § A business can exist even where it  involves: § Small scale activities ( Walker ) § Short term activities ( Shields ) § Athletic pursuits ( Stone ) § Illegal activities ( La Rosa ) § A business needs to be distinguished 
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from other activities: § Hobby or pastime ( Martin ) Ordinary proceeds of a Ordinary proceeds of a     business business § If taxpayer is carrying on a business,  then the entire “ordinary proceeds of the  business” are assessable even if such  amounts are applied for capital  purposes ( GP International  Pipecoaters ) § Receipts arising from the restructure of  a taxpayer’s business are not generally  ordinary proceeds of the business and  are therefore usually capital receipts  ( Merv Brown ) Banking, insurance and Banking, insurance and     investment cases investment cases
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§ Taxpayers are assessed on profits  arising from the sale of “revenue  assets”  § Mutual life insurance company  assessed on profit from the sale of its  investments (
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