acct254 midterm

    Cards (42)

    • evasion problems

      economic deterrence and fiscal psychology model
    • integrity of tax system
      perception of integrity, rights of taxpayers, tax payer affairs kept confidential
    • Key powers of the Commissioner
      contained in TAA 1994
      powers relate to collection of information
      relate to all persons, not just those under investigation
    • Secrecy
      obligation for IR officers (even past) to maintain secrecy
      Section 18 TAA
      Person punishable for breach = $15,000 fine or 6 months prison or both ( s 143 c TAA)
    • Recording interviews
      Generally voluntary
      interviewee can decline
      copies give to taxpayer and IRD
      admissible as evidence
      Section 17 i - can require any person to attend
    • Tax residency
      Determines liability for tax regardless of income source
    • Income subject to tax in NZ
      Residents are taxed on wordwide income
      Non-residents only taxed on income earned in NZ
    • A person is a resident if:
      - they have a permanent place of abode in NZ OR
      - personally present for more than 183 days in NZ in a 12 month period
      (section YD 1)
    • A person ceases to be a resident if:
      - cease to have a permanent place of abode in NZ AND
      - have been personally absent from NZ for more than 325 days in a 12 month period
    • Permanent place of abode case law:
      - Diamond
      - Van Uden
      - Case U17
    • Diamond
      permanent place of abode: "where a taxpayer habitually resides from time to time"
      simply owning a dwelling not sufficient
    • Van Uden
      - mariner worked 8 months per year at sea for Hong Kong shipping company
      - wife owned property he lived in
      - subscriptions etc., address registered for many things
      - UTP penalty imposed
      Held: permanent place of abode
    • Case U17
      - taxpayer moved to job in Singapore
      - established ties in Singapore
      - Separated from wife
      Held: not a NZ tax resident - no place of abode and not present in country
    • Summary of factors (permanent place of abode)
      - time in/out of NZ
      - Accomodation arrangements
      - Employment/business
      - Ties with another country
      - Domestic arrangements
      - Financial/economic ties
      - Miscellaneous
    • Transitional residency
      exemption for 48 months from NZ taxation on most forms of foreign income - excludes foreign employment
      Section HR 8(1)-(7)
    • Restricted convenants
      payment of restricting a person's ability to perform services
      S CE 9
    • Exit inducement

      payment by prospective employer to a person to give up all or part of their revenue earning capacity
      S CE 10
    • Henwood v CIR
      received payment - part was restrictive covenant
      Held: capital - not taxable, as restricted from professional activities
      HOWEVER not applicable anymore
    • Golden hello
      to encourage a person to take up a position
      Taxed under: s CE 1 OR CE 10
    • Golden handcuff
      Payment to valuable employee to remain in current employment
      CE 1 (a) "extra pay" OR CE 1 (g) "other benefit in money"
    • Extra payments
      Taxable
    • Compensation from employer for humilation, injury to feelings etc
      Not taxable
    • Lease incentives
      Payment by landlord to attract tenant to enter lease
      Wattie v CIR = not taxable
      However, now taxable
    • Compensation proceeds
      compensation for loss of income = income
      Steamship Co Ltd
      compensation for loss of capital asset = usually not income
      Glenboig Union Fireclay
    • personal property sales
      section CB 3: profit-making undertaking or scheme
      section CB 4: personal property acquired for purpose of disposal
      section CB 5: dealing in personal property
    • Dealing with personal property (s CB 5)
      only applies to dealers
    • What is dealing?
      Bates v CIR
      dealing connotes buying, selling or exchanging
      reasonable frequency of transactions or some continuity of effort
    • At what point is a person a dealer?
      Hazeldine v CIR
      purchased land before becoming a dealer
      later became dealer and sold land
      whether person is a dealer at point of sale
    • An amount caught by s CB 5 can also be caught under

      s CB 1 - business income
    • Property acquired for purpose of disposing of (s CB 4)
      Applies to one-off transactions and no capital distinction
    • Meaning of acquired
      Taxpayer must take positive, active step
      passive acquisition (e.g. gift) - not sufficient
    • AG Healing Co v CIR
      gain on selling property that was GIFTED not taxable, taxpayer did not take positive step to acquire
    • Property sold must be the same as property acquired
      Bedford Investments v CIR
      land subdivided
      land is still the same after subdivision
      Taxable
    • Acquired for purpose of selling/disposing
      Subjective test: purpose at date of acquisition
    • National Distributors Ltd v CIR
      Created indicators of purpose:
      nature of asset
      vocation of taxpayer
      number of similar transactions
      period of ownership
      circumstances of use and disposal
    • CIR v Walker
      purchased 63 acres to add to current farm
      sold 3 acres for profit
      Dominant purpose at time of acquisition = to expand farm NOT resale
    • Undertaking or scheme
      Two elements
      Undertaking or scheme
      Entered for intention of making profit
    • Duff v CIR
      simple purchase and resale not caught under s CB 3
      "plan, design, program of action devised in order to attain some end"
    • Grieve v CIR
      Some factors may be useful indicators of whether scheme is business-like
    • Profits from shares
      Taxable if fit with CB 3-5
      CIR v Inglis
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