The entire question as to the treatment of profits from enhanced real estate values not yet realized may be summarized as follows:

1. In the case of a real estate concern whose chief asset is its real estate, such appreciation should not be added to the cost price.

2. In the case of a concern engaged in some other kind of business, it may, under some circumstances and with proper restrictions, be permissible or even necessary to show such appreciation, but it should be stated so clearly that no one will be deceived as to the nature of the profit.

3. In the latter case, such profits should never be shown in the Profit and Loss account as arising from the operation of the business, but should be carried to a Reserve and Surplus account.

Profits from Miscellaneous Sources