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A taxpayer operated a stud farm that was an accepted trade.  The taxpayer also trained and raced horses that was regarded as a hobby and therefore not liable to tax.  five horses were transferred from the stud farm to the racing stables when the market value considerably exceeded the breeding costs.  It was held that as the disposal of the horses was in the course of the business the market value should be used and not its cost.  The case established the principle if trading stock is disposed of other then in the course of ordinary trade the market value at the date of disposal should be used.

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