Practice Questions – UNIT 6 (Badges of Trade)

Question 1
What are the ‘badges of trade’ and why is this concept important?

Question 2
Marcia Edwards is employed as secretary in an insurance company in Kingston. She became
interested in antique furniture about ten years ago when her grandmother left her an antique
furniture table and rocking chair which had pride of place in her apartment. In her spare time,
she visited old great houses and sales in pursuit of this hobby and acquired a few more pieces.
In order to finance a long visit to the United States to study, Marica sold all the pieces in her
collection. On her return from the USA she continued buying and selling antiques.

Consider whether or not Marica is carrying on a trade, giving your reasons fully and referring to
leading cases in this area

Question 3
Donald decided to sell on e-bay. In early 2017 he saw that there was a market for certain items
such as hand printed T-shirts of which he had a large personal collection. When he had sold his
collection, he bought, in a closing out sale, 20 dozen hand printed T-shirts which he put on e-bay
and sold in lots of three for the price of two.

Is Donald trading? Give reasons for your answer.

Question 4
John Dow is an astute man and the Government has been desirous for years to make John Dow
pay taxes. Mr. Dow is in the habit of buying Pick 3 and lucky 5 daily. He makes significant profits
from his activity which he considers essential for his lifestyle needs. He got the Lexus (2000)
model as a gift which he modified and sold to Gully Bop. He made a profit of $3 million as Gully
Bop wanted to prove to Ms. Chin that he had money. John was impressed with his profit and so
he bought 2 old Hummers and 2 old Rolls-Royce, which he modified and sold them. He made a
profit of $20 million dollars.

The Tax authority seeks your advice on whether considering these circumstances, John Dow is
liable to pay taxes. Your answer should be supported with the relevant case laws.