Sue Lin was made redundant from her employment on 15 March 2009. She is a motor car enthusiast and therefore decided to take this opportunity to indulge her hobby.

On 1 July 2008 Sue took out a bank loan of Rs750,000 at an annual  interest rate of10%, rented a workshop for 12- months at a rent of Rs4,000 per month, and purchased high precision equipment at a cost of Rs 235,000.

On 10 July 2008 Sue purchased four dilapidated motor cars for Rs 80,000 each. The restoration of the 4motor cars was completed on 10 June 2009 at a cost Rs 120,000 per motor car. Sue instantaneously sold all of the motor cars for a total of Rs 2,000,000.

Sue was then offered employment elsewhere in the country commencing on 1 July 2009. She therefore sold the equipment for Rs 150,000 on 20 June 2009,  repaid the bank loan on 30 June 2009.

Since she has just been indulging her hobby, Sue believes that the disposal of the motor cars throughout the tax year 2008/9 must be exempt from tax.

Sue has completed some research on the Internet and has discovered that whether or not she is treated as carrying on a trade will be determined according to the 'badges of trade':

Sue had no other income throughout the tax year 2008/9 except as indicated above and was entitled to deductions in respect of three dependents.

Required:

a) List the nine badges of trade and in brief describe the meaning of each of the ‘badges of trade' listed.

You are not expected to quote from decided cases.

b) In brief describe why Sue is likely to be treated as carrying on a trade in respect of her motor car activities.

c) Compute Sue's income tax liability for the tax year 2008/9, if she is treated as carrying on a trade in respect of her motor car activities.