5. (a) The Income Tax Act defines “trade” as includes a business and every trade, manufacture, adventure or concern in t
Posted: Wed May 04, 2022 4:34 pm
5. (a) The Income Tax Act defines “trade” as includes a business
and every trade, manufacture, adventure or concern in the nature of
a trade or business. However, it does not really say what is meant
by trade.
Required:
With reference to case law, discuss the manner in which
various Courts have applied in distinguishing income from trade or
business from that of a capital accretion with an emphasis on
transactions which have concerned isolated transactions in the sale
of land. (10 marks)
(b) You are the tax advisor for TC Tours Ltd, a company
engaged in the business of helicopter charter tours for eco
tourists. The company has a fleet of helicopters which it acquired
in 2016. In order to provide the necessary comfort for its
potential clientele, the Company modified and outfitted the
helicopter with a custom-made interior. The interior was designed
so that it can be easily removed without damage to the framework of
the helicopter. This was required in the event that the Company
decided to changes its line of business to transportation and cargo
logistics. In 2021, it did a major overhaul to the interior of all
the helicopters in the fleet. The costs incurred in relation to
this expenditure amounted to $360,000. It wishes to have all these
costs deducted in full in 2021. Required: You are to advise the
company on whether the deduction may be granted for the full costs
in 2021. (15 marks)
and every trade, manufacture, adventure or concern in the nature of
a trade or business. However, it does not really say what is meant
by trade.
Required:
With reference to case law, discuss the manner in which
various Courts have applied in distinguishing income from trade or
business from that of a capital accretion with an emphasis on
transactions which have concerned isolated transactions in the sale
of land. (10 marks)
(b) You are the tax advisor for TC Tours Ltd, a company
engaged in the business of helicopter charter tours for eco
tourists. The company has a fleet of helicopters which it acquired
in 2016. In order to provide the necessary comfort for its
potential clientele, the Company modified and outfitted the
helicopter with a custom-made interior. The interior was designed
so that it can be easily removed without damage to the framework of
the helicopter. This was required in the event that the Company
decided to changes its line of business to transportation and cargo
logistics. In 2021, it did a major overhaul to the interior of all
the helicopters in the fleet. The costs incurred in relation to
this expenditure amounted to $360,000. It wishes to have all these
costs deducted in full in 2021. Required: You are to advise the
company on whether the deduction may be granted for the full costs
in 2021. (15 marks)