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David Emporium operates a chain of successful retail stores. In order to obtain some finance for its operations, the company entered into a loan agreement
David Emporium operates a chain of successful retail stores. In order to obtain some finance for its operations, the company entered into a loan agreement with a subsidiary company in which it loaned the subsidiary a substantial sum in return for a right to large interest payments. Three days later (as was always the plan) it assigned the right to these interest payments to a finance company in return for a lump sum payment. Is the profit made from the assignment of these interest payments likely to be ordinary income? Question 2Answer a. Yes, as the company had a profit making intention in this arrangement and even though the transaction is extraordinary it can be
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