Problem
Leo is employed full time as a hospital nurse. In his spare time he is a model railway enthusiast. For many years Leo has been spending weekends at his local model railway clubrooms. Here he meets fellow enthusiasts who are constructing a model of Wellington Railway Station complete with working trains. As other enthusiasts have learned that Leo is a highly skilled model maker he has come to be in demand. He starts by helping others complete their models. Then he accepts a request from an Auckland enthusiast to build a model for payment. Soon Leo is selling models of trains on eBay. Typically, Leo will spend about an evening a week making model trains for sale. Leo finds this helpful as his own model making can be an expensive pastime and the money that he gets from selling model trains helps him recover some of his own costs of model making.
Task
Explain if the money Leo gets from making models for sale is likely to constitute business income under section CB1 of the Income Tax Act 2007.
Analysis from the following factors:
Relevant factors for determining the existence of a business
Statements by the taxpayer as to intention
Nature of the activity
Period of which the taxpayer engages in the activity
The scale of operations and the volume of transactions
Commitment of time, money and effort
The pattern of activity
The financial results
Whether the operations involved are the same kind and carried on in the same way as those which are characteristic of ordinary trade in the line of business in which the venture was conducted.