Sharkey (Inspector of Taxes) v. Wernher
House of Lords
3 All ER 493 (1955)
Facts
Lady Zia Wernher (defendant) bred and raced horses. The horse-breeding operation was a business, and the horse-racing operation was for personal enjoyment. Wernher transferred five horses from her stud farm to her racing stables. Wernher deducted the costs associated with breeding the horses from her stud-farm accounts. The transaction involved no exchange of money as the horses were bred by Wernher through her horse-breeding operation and then personally used by Wernher. Sharkey (plaintiff), the inspector of taxes, held that, as the breeder, Wernher was responsible for taxes on the transaction based on the fair market value of the horses, approximately £3,900 each. Wernher appealed, arguing that because the transfer involved no exchange of money, she should not be taxed on profits that were not made. The Court of Appeal reversed, determining that Wernher was responsible for taxes based on the cost of producing the horses, approximately £700 each. Sharkey appealed.
Rule of Law
Issue
Holding and Reasoning (Simmonds, J.)
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