ProfitFmakingtransactionsOUTSIDE theordinarycourse ofbusiness3 WAYS for it to still be income:INCIDENTAL & RELEVANT TRANSACTIONS:Memorex (1987)TP’s main business is to lease computer equipment (sometimes selling)Issue: whether receipts from sale of leased computer constitute income or notCourts: Yes, income from business cuz it is incidental and relevant to ordinary business (nexuswith core business activity altho not major component of business)EXTRAORDINARY TRANSACTIONS: Gains made OUTSIDE the ordinary course of TP’s businessIsolated and extraordinary transactions usually only generate OI if they fulfill requirement of one or more of thefollowing 3 categories:Principle in Whitfords Beach1ststrand of Myer Emporium2ndstrand of Myer EmporiumTransaction has sufficientcharacteristics of a businessLThere’s business operation orcommercial transactionLThere’s profitLmaking intentionupon entering the transactionLProfit was made by meansconsistent with original intentionProceeds from transaction will be OIif TP sells the right to income from anasset w/o selling underlying asset.(Compensation principle)MyerMyer’s ordinary business – buying and selling goods. Myer loaned 80mil to subsidiary and it hadthe right to receive interest under loan agreement. Myer sold the right to receive interest toreceive interest to 3rdparty (Citicorp) and they got 45.3mil in return. Issue: is 45.3mil income?Court: altho not ordinary course of biz, 45.3mil is OILbcuz transaction was commercial profitLmaking transaction (1ststrand)Lcompensation principal: it is replacing interest where interest = OI, thus OI (2ndstrand)Westfield (1991)Bought land with intention to develop it as a shopping mall. Did not happen and ended up sellingland for profit. Issue: Gain on sale of land was income or capital gain?Court: Not OI but capital gain. Gain was not made in the way intended when transaction wasentered into. Gain was made via selling the land, not by intended development of shopping mall.Principles fromMyer &1.If extraordinary transaction is entered into by TP with the purpose of profitLmaking, theneven if it is not part of TP’s ordinary business, any gains are more likely to be income[Myer]Strong connectionbetween TP’s corebusiness and theunusual activity toshow nexus withcore businessMyer – HC decisionWestfield – Fullfed. court decision.We accept theprinciple inWestfield case cuzcommissioner didappeal to HC butHC didn’t grantpermission. Caninfer that HCagrees with FFC’sdecision.