QUESTION Terry has retired to Matakana and owns a 10-acre lifestyle block on which he has developed an extensive citrus fruit orchard and an organic vegetable garden. Since 2013 he has often had extra produce surplus to his own needs which he sells on a small stand outside the front of his property which gets lots of passing traffic especially in the summer. Sales vary each year depending on what surplus Terry has spare since he also freezes and preserves the produce for his own use or for family. In 2013-2014, he had sales of $2000, in 2014-2015 sales of $3500, in 2015-2016 sales of $4300, in 2016-2017 sales of $2800, in 2017-2018 sales of $3.200, and in 2018-2019 sales of $3,750. Terry regularly gives surplus produce not sold on his stall to the local food bank for distribution to their customers. Since 2013 Terry has also does woodturning using native wood off his property and produces picture frames, chopping boards and small bowls that he sometimes sells on his small stand. He considers that this is a relaxing hobby activity for him in his retirement and he often gives what he produces away to friends and family as gifts. In 2015 Terry was approached by the local Craft Market at Matakana to supply his wooden items for selling in their shop facility. Terry began doing this in 2015 and as part of the activity is rostered to serve in the shop 5 days a month. In 2015-2016, he had sales of $3,000 and costs of $1100, including the commission he paid to the Market. In 2017, Terry decided to purchase a new lathe for $980 to assist him in his woodturning activity. Terry always wanted this particular machinery because he knew it would help him in making a greater variety of wooden items with a much nicer finish. He is also now able to make wooden items as specifically requested by customers of the craft market. In 2017-2018. as a result of the new items he is able to produce, his sales are $4,800 with costs of $2,300. In 2018-2019. Tenry has sales of $6,000 with costs of $2.800. Terry enjoys being involved in the Craft Market because of the friendships he has made among the members and because of the various discussions he can have with customers that come into the shop when he is on duty. He does not consider himself to be in business but has kept records of all his costs since selling at the Craft Market. Using the appropriate statutory references and case law, advise Terry whether he is in business? If so, when did the business start? Refer to relevant legislation and case law. Relevant law: ITA CB1 - an amount is income of that person if that amount is derived from a business DA1-deductions are allowed for expenses incurred in the course of running a business YA1-see definition of business Leading case - Grieve Application Tips for answering: 1. Consider each Grieve factor separately and the arguments in favour of finding a hobby and in favour of finding a "business". 2. Consider any other cases that might apply to that factor 3. Make an overall assessment of whether you think that factor is in favour of finding a hobby or in favour of finding a business. 4. After you have considered each factor, make an overall assessment. 5. For the "Terry" question, there are two activities to consider the vegetable growing and the wood-turning. So you need to go through the Grieve factors for each activity Example: Vegetable Growing : The nature of the activity is growing vegetable. This can be both a hobby (people grow vegetables as a hobby at home) or a business (there are commercial vegetable growers) Case F55 is an example of a TP pursuing a hobby in racing. Case D54 is an example of deer hunting being a hobby This factor is neutral, and we need to examine the other factors to decide whether the vegetable growing is a hobby" or a "business. Period of Time Scale of operations Commitment of time, money and effort Pattern of activity Financial Results Comparison with similar operations Intention to make a profit Overall Conclusion for Vegetable Growing Wood Turning : Nature of the Activity Period of Time Scale of operations Commitment of time, money and effort Pattern of activity Financial Results Comparison with similar operations Intention to make a profit Overall Conclusion for Wood Turning QUESTION Terry has retired to Matakana and owns a 10-acre lifestyle block on which he has developed an extensive citrus fruit orchard and an organic vegetable garden. Since 2013 he has often had extra produce surplus to his own needs which he sells on a small stand outside the front of his property which gets lots of passing traffic especially in the summer. Sales vary each year depending on what surplus Terry has spare since he also freezes and preserves the produce for his own use or for family. In 2013-2014, he had sales of $2000, in 2014-2015 sales of $3500, in 2015-2016 sales of $4300, in 2016-2017 sales of $2800, in 2017-2018 sales of $3.200, and in 2018-2019 sales of $3,750. Terry regularly gives surplus produce not sold on his stall to the local food bank for distribution to their customers. Since 2013 Terry has also does woodturning using native wood off his property and produces picture frames, chopping boards and small bowls that he sometimes sells on his small stand. He considers that this is a relaxing hobby activity for him in his retirement and he often gives what he produces away to friends and family as gifts. In 2015 Terry was approached by the local Craft Market at Matakana to supply his wooden items for selling in their shop facility. Terry began doing this in 2015 and as part of the activity is rostered to serve in the shop 5 days a month. In 2015-2016, he had sales of $3,000 and costs of $1100, including the commission he paid to the Market. In 2017, Terry decided to purchase a new lathe for $980 to assist him in his woodturning activity. Terry always wanted this particular machinery because he knew it would help him in making a greater variety of wooden items with a much nicer finish. He is also now able to make wooden items as specifically requested by customers of the craft market. In 2017-2018. as a result of the new items he is able to produce, his sales are $4,800 with costs of $2,300. In 2018-2019. Tenry has sales of $6,000 with costs of $2.800. Terry enjoys being involved in the Craft Market because of the friendships he has made among the members and because of the various discussions he can have with customers that come into the shop when he is on duty. He does not consider himself to be in business but has kept records of all his costs since selling at the Craft Market. Using the appropriate statutory references and case law, advise Terry whether he is in business? If so, when did the business start? Refer to relevant legislation and case law. Relevant law: ITA CB1 - an amount is income of that person if that amount is derived from a business DA1-deductions are allowed for expenses incurred in the course of running a business YA1-see definition of business Leading case - Grieve Application Tips for answering: 1. Consider each Grieve factor separately and the arguments in favour of finding a hobby and in favour of finding a "business". 2. Consider any other cases that might apply to that factor 3. Make an overall assessment of whether you think that factor is in favour of finding a hobby or in favour of finding a business. 4. After you have considered each factor, make an overall assessment. 5. For the "Terry" question, there are two activities to consider the vegetable growing and the wood-turning. So you need to go through the Grieve factors for each activity Example: Vegetable Growing : The nature of the activity is growing vegetable. This can be both a hobby (people grow vegetables as a hobby at home) or a business (there are commercial vegetable growers) Case F55 is an example of a TP pursuing a hobby in racing. Case D54 is an example of deer hunting being a hobby This factor is neutral, and we need to examine the other factors to decide whether the vegetable growing is a hobby" or a "business. Period of Time Scale of operations Commitment of time, money and effort Pattern of activity Financial Results Comparison with similar operations Intention to make a profit Overall Conclusion for Vegetable Growing Wood Turning : Nature of the Activity Period of Time Scale of operations Commitment of time, money and effort Pattern of activity Financial Results Comparison with similar operations Intention to make a profit Overall Conclusion for Wood Turning