read this link to assist you going forward
http://www.ird.govt.nz/technical-tax...nsactions.html
you'll notice the judgement refers to two 'limbs' with sectional references , you may want to try and read those sections on the IRD web site under the Income Tax Act 2007
my text book NZ Taxation 2010 outlines three limbs that apply to transactions involving personal property which are not part of a business and where the asset is not trading stock where the realised gain will form part of the taxpayers income if it is caught by any of these limbs
- 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
- 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
- Business Dealing in Personal Property - an amount that a person derives from the disposing of personal property is income of the person if their business is to deal in property of that kind
So one needs to examine those and see if one would be caught by any those limbs
Some further notes.
It says limb 2 " does not apply to shares acquired with the intention of resale. It only applies to shares acquired with the purpose of resale.
So it is distinguishing between purpose and intention - something us non lawyers find a bit difficult. but later on the book says... "A definite intention to sell the property in the immediate future is not necessarily within the scope of the second limb because of of the distinction made in Plimmer v CIR 1958 when Barrowclough said 'purpose is usually, and more naturally, understood as the object which he has in view of selling withou having also an intention of selling, but, in ordinary language purpose connotes something added to intention and the two words are not usually synonymous'"
The Court acknowledges a number of reasons why a taxpayer would buy and sell shares without any regard to the tax consequence (which I take as meaning these are good reasons to buy and sell shares without being a trader or of incurring income tax)
- To maintain the portfolios overall balance
- To maintain the portfolios exposure in relation to particular sectors
- To sell whn brokers issue a not of caution or warning
- To sell when there has been a change in management
- To sell when there has been a management buyout
- To sell when there has been a take over offer
- To buy shares when they are clearly undervalued
- To sell share when market sentiment has over valued them in terms of the fundamentals of the company.
Bottom line though , your interest costs are deductible and especially so for non trading shares as the whole issue of dedcuctability centres around the expense being related to the production of taxable income in the form of dividends.
Hope this helps others in their decision making process of share profits being taxable income