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If a person carries on a trade of dealing in land and also holds properties as investments, it is necessary to distinguish between the properties held as investments, which are classified as fixed assets, and those which form part of the stock of the land-dealing trade. This is because a profit or loss arising from transactions relating to the two different types of asset are dealt with differently. Transactions relating to fixed asset investments must be dealt with under the capital gains tax regime, and those relating to stock are treated as trading items.

This issue arose in Hudson¹ where a retired druggist invested all his savings in real estate. He subsequently bought and sold other properties, and trading assessments were made upon him on the basis that he was carrying on the business of dealing in land. The General Commissioners decided that some of his transactions were in the nature of trade. The court decided that there was evidence to suggest that there were some trading transactions and that in computing the profits all properties held by him