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The most important characteristic of the business activity of building and selling of houses or commercial buildings and the development of land is that land is trading stock, and it has to be treated for tax purposes in the same way as trading stock of any other kind. For the distinction between properties held as investments and properties which should be regarded as stock in trade see B2.603. See also B5.216 for trading in land generally.

The stock of land has to be brought into the first trading account at its true cost to the business, and has to be valued at each accounting date at its cost price or net realisable value, whichever is the lower. If, for example, the land was bought with the condition that a further sum was to be paid, in addition to the expressed purchase price, on the resale of the land, the true cost is the purchase price plus the value of the further liability. Thus, in Bennett, Oswald & Worskett¹, a firm purchased a piece of land at a