Professional Documents
Culture Documents
MARKING SCHEME
2
Answer to Question 1 [25 marks]
Answer to Question 1(a) [19 marks]
See computation.
4
Answer to Question 5 [20 marks]
Answer to Question 5(A) [11 marks]
(B) 11 marks: max
It appears that when the badges of trade are used to test the facts of the case, it is highly that there is an
adventure or concern in the nature of trade and as such the gain would constitute income from business
and thus subject to tax.
The following badges of trade indicate adventure in trade:
Profit seeking motive
He bought it in good location and hopes to sell the property when price is right even in near future.
Number of similar transactions
This is his fourth transaction that he sold the property in 5 years. The frequency is high.
Type/nature of asset
The 1 property could be sold in the adventure of trade or may be hold for investment.
Interval between purchase and sale
The property was held for less than two years.
Method of finance
The borrowing is high which shows he took high risk just like those who are doing business.
Surrounding factors
This test appears to show that he was forced into selling because of his debts and therefore he may be able
to argue that he is not in the adventure of nature.
mark for the relevant badge of trade and the relevant discussion 1 mark
Conclusion: 2 marks
RM
QBE = 5,710,000
(ii)
QPE =85,000
(iii)
QPE = 96,000
7
The profit making apparatus or the business structure of the company is destroyed.
This was seen in the company when it was forced to sell most of the assets due to huge liability
owing to creditors and bankers.