Assessability of Distributions from Assets Revaluation Accounts of Companies
New Zealand Current Taxation, Vol. 26, pp. 224-226, 1982
2 Pages Posted: 2 Mar 2010
Date Written: 1982
Moss & Mardon v Commissioner of Inland Revenue (1982) 5 NZTC 61,151 involved taxpayers who held shares as trustees in a company. The taxpayers received dividends from the shares. It is common ground the dividends were taxable unless saved by section 4(5) of the Income Tax Act 1976, which provides that certain dividends paid out of capital profits of a company are not taxable in the hands of the shareholders. There are two circumstances where the exception applies. First, where a company has realised a capital asset and the whole or part of any profit arising from the realisation is subsequently included in a distribution to shareholders; secondly, where a company has made a capital profit or gain and the whole or part of that profit is included in the dividend. The judge decided that neither of these rules applied in the circumstances and held that the Commissioner was correct to tax the dividends.
Keywords: Income Tax Act 1976, Dividends, Assessability
JEL Classification: K34
Suggested Citation: Suggested Citation