Taxation Law

Question:

What is the “first strand” of the decision in FC of T v The Myer Emporium Ltd 87 ATC 4363? Did the courts apply the first strand in any of the following cases: FC of T v Cooling 90 ATC 4472, Westfield Ltd v FC of T 91 ATC 4234, Henry Jones (IXL) Ltd v FC of T 91 ATC 4663 and SP Investments Pty Ltd v FC of T 93 ATC 4170? If the first strand did not apply in some of these cases but amounts were nevertheless assessable, on what basis was this so?

Answer:

Introduction to the Myer Case and its “STRANDS”:
In the case, “FC of T v The Myer Emporium Ltd 87 ATC 4363”, the taxpayer “The Myer Emporium”, worked out a financial arrangement during 6-9 March 1981. Under the arrangement, it lent $80 million to its …show more content…

When the taxpayer sold the land for $735,000 acquired previously for $450,000, there was an income. The land was originally bought for the purpose of itself establishing a shopping center but later it was sold to AMP, on the basis that AMP would

FC of T v The Myer Emporium Ltd 87 ATC 4363 P. 232, Australian Tax Casebook, Stephen Barkoczy, CCH 2008.

employ the taxpayer to design and construct the center. The question was whether the first strand would apply or not. But the Court held that the first would not apply to this case and the profit was held to be of capital nature and therefore not assessable under s 25(1). Application of first strand in the decisions of Henry Jones and SP Investments cases: Similarly, the first strand did not apply to the cases: Henry Jones (IXL) Ltd v FC of T 91 ATC 4663 and SP Investments Pty Ltd v FC of T 93 ATC 4170. However, the Court decisions on these cases were that the incomes were assessable.

How were the incomes assessable in those two cases?
Interestingly, the first strand did not apply in Henry Jones (IXL) Ltd v FC of T 91 ATC 4663 and SP Investments Pty Ltd v FC of T 93 ATC 4170 but still the amounts were held to be assessable. However, the second strands applied to the decision in these two cases, therefore amounts were seen as assessable in these cases. Apparently, in