Land Sales: Assessment of Profit When Price Received Includes a Non-Cash Element
John Prebble QC
Victoria University of Wellington - Faculty of Law; Institut für Österreichisches und Internationales Steuerrecht, Wirtschaftsuniversität Wien; University of Notre Dame Australia - School of Law
May 17, 1979
The paper deals with the taxation of transactions involving the sale of land where the price received includes a non-cash element, most commonly, a mortgage to the vendor. Generally, such transactions are taxable in New Zealand only when the vendor is in the business of selling properties. The issue is at what point the mortgage is “received” for tax purposes. The paper argues that the true value of the non-cash element should be established at the point when the property is sold. In cases where the vendor has discounted the mortgage, he or she should be able to claim the discount as a deduction from overall taxable income. In cases where the mortgage was sold for more than face value, the vendor should be taxed on its actual value.
Number of Pages in PDF File: 23
Keywords: Tax Law, Property, Sale of Land, Mortgage, Income Tax
JEL Classification: K11, K34
Date posted: November 16, 2009
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