BIM60105 - Measuring the profits (particular trades): land: trading transactions: acquisition and disposal of superior interest: marriage value

Where a tenant acquires and resells a superior interest in land, our argument is:

• such transactions involve two separate assets - the tenancy and the freehold,
• the tenancy is a capital asset and any gain on that asset will be a capital gain,
• the freehold was not acquired with the intention to retain but to sell at profit,
• the freehold was therefore never part of the purchaser’s capital structure and is not consequently a capital asset,
• it is the profit on the freehold alone that we wish to isolate and tax as the profit of an adventure in the nature of trade,
• that profit is part of a marriage profit which is generated when the tenancy and the freehold merge.