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3.5 PersonalPropertySales ShareTransactions Exempt ExcludedIncome word

3.5 PersonalPropertySales ShareTransactions Exempt ExcludedIncome word

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ACIS 254 12 AND 18 MARCH 2009 LECTURE 9 & 10 PERSONAL PROPERTY SALES, PROFITS FROM THE SALE OF SHARES, EXEMPT AND EXCLUDED INCOME. TOPIC 1: Income from Personal Property Sales [NZT 4] 1.1 Introduction Sections CB 3 to 5 ITA 2007 outline situations where personal property transactions may be income and taxable [NZT 4.2.1]. Section CB 3 ITA 2007 Profit-Making Undertaking or Scheme “An amount that a person derives from carrying on or carrying out an undertaking or scheme entered into or devised for the purpose of making a profit is income of the person.” Section CB 4 ITA 2007 Personal Property Acquired for Purpose of Disposal “An amount that a person derives from disposing of personal property is income of the person if they acquired the property for the purpose of disposing of it.” Section CB 5 ITA 2007 Business of Dealing in Personal Property “An amount that a person derives from disposing of personal property is income of the person if their business is to deal in property of that kind.” Sections CB 3 to CB 5 ITA 2007 (and the equivalent in the ITA 2004) replace the former three limbs (parts) of s CD 4 ITA 1994. 1 Note: ss CB 6 – CB 23 ITA 2007 deal with land transactions. 1.2 Section CB 5 ITA 2007: Dealing in Personal Property [NZT 4.2.2] This section (which was formerly the first limb under s CD 4 ITA 1994) applies: (i) Only to persons who are dealers in their own right - what is dealing? Bates v CIR [1955] 6 AITR 283 stated that “dealing connotes buying or selling or exchanging” and to constitute a business of dealing where a person does not hold /herself out as carrying on a business, his Honour said that "generally speaking, the law requires a reasonable frequency of transactions or some continuity of effort in respect of buying, selling or exchanging." A dealer is a person who buys or sells some form of merchandise or trades in some commodity. The carrying on of a business as a dealer suggests the organisation of some dealing activity in the course of conduct, even if only for a short period in terms of time. Piers v CIR (1995) 17 NZTC 12,283 (HC) 1 Section CD 4 ITA 1994 provided that: “The gross income of any person includes, any amount derived from the sale or other disposition of any personal property or any interest in personal property (not being property or any interest in property which consists of land), if the business of the person comprises dealing in such property [first limb] or if the property was acquired for the purpose of selling or otherwise disposing of it [second limb], and any amount derived from the carrying on or carrying out of any undertaking or scheme entered into or devised for the purpose of making a profit [third limb]."
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This case concerned a superannuation fund that invested in the share market. Temm J held the superannuation fund had been dealing in shares. His Honour concluded this on the basis of the frequency of the share trading transactions, where at least 176 transactions took place over a three year period. The decision follows that of the earlier Court of Appeal decision of CIR v Rangatira Ltd
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