1. Mr. Johnson inherited a piece of agricultural land in Perak from his grand-father in 2010. On 1 February 2022, Mr. Johnson applied to the Land Office and was granted approval to convert the land to residential use and to split the land into 20 residential lots. Mr. Johnson appointed a real estate agent to facilitate the sales. Mr. Johnson sold all the residential lots in the year 2022 and made a gain of RM3 million.

Required:

Determine, with brief explanations and by reference to the badges of trade, whether or not the profit from the above disposal is liable to income tax. (5 marks)

2. Vision Sdn Bhd purchased proprietary rights (patent) on 1 January 2022 which consists of the following costs:

	RM
Purchase price of the patent	200,000
Consultancy fees	28,000
Legal fees	12,000
Royalties	4,000

The company recorded all of the above in the Statement of Financial Position for the year of assessment 2022. The company has fulfilled all the conditions for claiming a deduction for proprietary rights.

Required:

Explain whether each of the above expenses is deductible for income tax purposes.