Quote Originally Posted by peat View Post
The law is perfectly clear.
all you need to do is truthfully answer this question: why did I buy these shares?
Correct. The problem is IRD wont beleive you so will look at other eveidence to determine such as frequency of trades etc.

Quote Originally Posted by KW View Post
My tax adviser (a lawyer, not an accountant) said that unless you declare yourself to the IRD as being "in the business of trading" then you are considered an investor, even if you "trade" a portion of your portfolio.
Incorrect but practically, probably true. There are a number of tests including 'amounts derived from busines' and 'personal property acquired for the purpose of disposal'. Your lawyers advice only covers the first.

Each individual investment should be tested. For example, you are a long term investor, but you get a hot time that a share is going to be taken over, so ignoring insider trading, you buy on the tip and sell 4 weeks later at a 50% profit. That should be taxable as you acquired the share for the purpose of disposal.

Thats an obvious example. BUt take XRO for example. They have stated they wont be paying dividends in the foreseable future. So the only reason to buy is for 'capital' gain. Not sure on this one.