B5.217 Cases where no trade in land was found
In IRC v Reinhold1, a director of a company trading as a warehouseman bought four houses and sold them later at a profit. The houses were bought for resale and the appellant instructed his agents to sell whenever a suitable opportunity arose. The court held that the fact that the houses were bought with a view to resale did not of itself establish that the transaction was in the nature of trade and that the surplus was not taxable.
Where a partnership purchased land with the declared purpose of holding it as an investment, and part of the land was leased in lots to a company in which the partners were majority shareholders and sole directors, and the company built houses and sold them, the Special Commissioners decided that the partnership held the land as an investment. The court upheld their decision2.
In Copo Ltd v Scragg3, a company carrying on apple growing organised a scheme under which subscribers paid for certain rights in a stated number of apple trees to be planted by the company. The company was to tend the trees and market the fruit, accounting to the subscriber for the net profits less a percentage charge. The company held the land on which the trees were planted on trust for sale for the benefit of the subscribers, a subscriber's prospective share in the proceeds of sale of the land being in proportion to the number of trees planted for him.