This is the assignment.
There are 2 questions with 1500 words each. Altogether is 3000 words
Question 1: Capital Gains Tax
The New Zealand government introduced taxing on the sales of residential land and property on 1st October 2015 (also known as the bright-line test). The test requires income tax to be paid on any gains from the sale of residential land and property that is bought and sold within two years, with the exception of the main family home and inherited property. The purpose of the bright-line test is to supplement the "intention test" in the current land sales rules. The intention test makes gains from the sale of real property purchased with an intention of resale taxable.
Required:
Evaluate this tax in relation to the maxims/canons of good taxation.
Word limit: 1500 words (not including references)
Question 2: Income - Undertaking/Scheme involving development or division of land If an undertaking or scheme involving development or division of land is carried on by or for a person and the undertaking or scheme:
• was begun within 10 years of the person acquiring the land, and involves more than minor work (s CB 12); or
• involves significant expenditure on the types of work specified in s CB 13; is it possible that the amount derived on the disposal of some of the land is not income, even if none of the statutory exclusions (the residential exclusion (s CB 17), the business exclusion (s CB 20), the farm land exclusion (s CB 21) and the investment exclusion (s CB 23)) from s CB 12 or s CB 13 apply?
3 To determine whether the proceeds of disposal of any particular piece of land are taxable because of an undertaking or scheme of development or division, it is necessary to consider whether the disposal occurs in the circumstances detailed in s CB 12 or s CB 13. This requires analysing whether the disposal relates to an undertaking or scheme involving the development of the land or the division of the land into lots having been carried on (s CB 12(1)(a) and (b) and s CB 13(1)(b)(i) and (ii)). This is the crucial requirement. There is no need to consider the other requirements of ss CB 12 and CB 13-most notably whether development or division work is of a minor nature (s CB 12(1)(d)) or involves significant expenditure on the activities specified in s CB 13(1)(b)(iv).
Required:
Analyse whether it is possible that the amount derived on the disposal of land is not income, even if none of the statutory exclusions (the residential exclusion (s CB 17), the business exclusion (s CB 20), the farm land exclusion (s CB 21) and the investment exclusion (s CB 23)) from s CB 12 or s CB 13 apply?
Your analysis must include a discussion on:
• "Land" as referred to in each part of the provisions;
• Whether there has been an "undertaking or scheme" carried on;
• What land is part of an undertaking or scheme involving development or division; and
• The circumstances in which the disposal of land that was part of such an undertaking or scheme will not give rise to income under s CB 12 or s CB 13.
Legislative references
• Income Tax Act 2007: ss CB 12, CB 13, CB 17, CB 20, CB 21, CB 23, CB 23B and DB 27
Case references
• Anzamco Ltd (in liq) v CIR (1983) 6 NZTC 61,522 (HC)
• Case E90 (1982) 5 NZTC 59,471
• Case J37 (1987) 9 NZTC 1,219
• Church v CIR (1992) 14 NZTC 9,196 (HC)
• Cross v CIR (1987) 9 NZTC 6,101 (CA)
• Cross v CIR (1985) 7 NZTC 5,054 (HC)
• Dobson v CIR (1987) 9 NZTC 6,025
• Lowe v CIR (1981) 5 NZTC 61,006 (CA)
• O'Toole v CIR (1985) 7 NZTC 5,045 (HC)
• Paul Stephens Construction Limited v CIR (1990) 12 NZTC 7,192 (HC)
• Smith v CIR (1987) 9 NZTC 6,045 (HC)
• Smith v CIR (No 2) (1989) 11 NZTC 6,018 (CA)
• Vuleta v CIR [1962] NZLR 325 (SC)
• Wellington v CIR (1981) 5 NZTC 61,101 (HC)
• Woolston v CIR (1987) 9 NZTC 6,010 (HC)
Word limit: 1500 words (not including references)