Question

Nikki owns and carries on a chain of clothing stores. So far she has 7 of such stores. When she chooses a premises to open a new store on, the most important criterion is where she can maximise the sales of clothes. However, she is also influenced by the potential for the land on which each of the shop premises is located on to grow in capital value. In late 2019, Nikki decides to develop one of the shop premises, because real estate in the area which it is located on had appreciated markedly in recent years. This involved Nikki obtaining a building approval from the local council, demolishing the shop, and building a 6 storey apartment building on the land. As Nikki did not know much about building, this consisted of contracting a major builder to be in charge of the process of building the apartment. These apartments are sold individually to the public through a leading real estate agent.

Ignoring Capital Gains Tax, discuss whether the sales proceed from the apartments generate ordinary income by citing the relevant cases to justify the following discussions.

Answer 1

Answer: Sunmatized the information provided frithe question; nikki Olon, and carecies on a chain of clothing Stores ---- → NO, as ignoring the capital gain tax, the sales proceeds from the aparlment generates cadiraty income, In the point of view of Nikki she has intention to maximize sales, she can think it as sale proceeds from apoiotments. ~ Apart from that she is influences from potential land for development grow capital value → She developed her land with her consent so she has to owe capital to gain taxi pay tax as capital She has only pay tax for 6 shops as income from bewiness but she has to commercial building as gain tax. - She has to declare that the land as a commercial building and she has to pay capital gairi tax. → But when she constructed a commercial building, so she declares as income from

2 as Capital gain and income from Howe poop exty when she give for cent -> But that income is not treated sole proceeds om apaobeids. As per income tax sule, any income croising out from tent of property tbeated as Income from house property and income asisting from sale of building treated capital gain. CONCLUSION: In the nikki point of view, she can think it as. Lale peeceeds. But for the tax propose, it is treated capital gain tax.
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