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The distinction between trading in land and treating land as a capital asset is not clear cut and has been tested in the courts many times. The following is a summary of cases where the taxpayers were found to be trading in land. For cases where trading in land has not been found see B5.217, and for cases where it was found that there was trading in land and the land owner also invested in land see B5.218A–B5.218C.

A land dealer, particularly in the case of an individual, may at the same time be the holder of investments in land. But there is no doubt that when the purchase and sale of land is carried out by a person whose business is closely connected with dealing or development, there is more likely to be a finding that the transaction was by way of trade.

Where a speculative builder, who contemplated retiring, bought an area of land for a farm, but later for health reasons abandoned the idea and resold the land at a profit, the