The Kratzmann case, while often cited, doesn't serve as a reliable precedent for many taxpayers. Here's why:
Background: In Kratzmann's situation, he bought land planning to build shops, offices, and flats. His idea was to sell some units to cover costs and keep the rest for rental. But due to financial issues, he gave up on the building idea and sold the land at a profit. The tax office wanted to tax this profit as part of a profit-making scheme, but the High Court disagreed.
Understanding the Decision: The High Court saw that while Kratzmann had a profit-making plan, it didn't involve selling the land itself. Instead, it focused on building flats for rental income. So, when Kratzmann sold the land after abandoning his building plan, it wasn't considered part of the profit-making scheme anymore.
Essentially, Kratzmann won because he showed that his main goal was to build and hold the property for rent, not to make a profit from selling the land.
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