Question 3

Mr. Lee sold a luxury flat and made a profit of $5,000,000. A profits tax assessment was issued to him. He lodged an objection to the assessment on the ground that the property was purchased as a long-term investment. The profit on sale was a capital gain which should be exempt from profits tax. The Commissioner of Inland Revenue (CIR) did not agree with his grounds of objection and issued a Determination to him confirming the assessment. Mr. Lee is your client. He said he did not agree with the CIR's determination and wished to appeal against the determination. As you are his accountant, and he asks you for advice.

REQUIRED: Explain to Mr. Lee what he should do in the above situation. (25 marks)