A trader could reduce his profits and as a consequence his liability to tax by selling his stock at less than it is worth or by giving it away. This would benefit somebody else at the trader’s expense.

This may be counteracted by the transfer pricing rules, but where these don’t apply, there are also specific rules that substitute open market value for the actual consideration where:

trading stock of a person's trade is appropriated by the person for any other purpose;

something that belongs to a person carrying on a trade, but is not trading stock of the trade, becomes trading stock of the trade;

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