Tax advice

[Snoopy]

Rights issues (Below is a blurb from an IRD publication)
Companies can offer their shareholders rights to buy new shares, generally at a discount to the market value.

Legislative changes have been made to make it clear that the discounted amount is not a taxable dividend for shareholders that exercise the right, and that the right itself (which has value and may in some cases be traded or renounced) is not a taxable dividend.

The policy rationale for ensuring that rights and discounted shares issued under a rights issue are not treated as dividends is that the company does not give up anything of value. A rights issue involves the company raising new equity when the shareholders invest new funds in the company.

So the discount is not a taxable dividend from the company and the right itself is NOT a taxable dividend therefore if you sell the right, I guess this means the proceeds from the sale of the rights is also not a dividend? (or taxable income) for that matter.

Does anyone have any information on this or have experience with the IRD regarding proceeds from selling rights and whether it is taxable?

Tried a search but nothing came up.

Not sure why you did a search when you have already been to the IRD and they have given you the answer. The bit in bold answers your question.

The only time the proceeds of 'selling a right' would be taxable, would be if you bought those rights with the intention of selling them to make a profit
It's the same deal with head shares.

SNOOPY

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[Aaron]

Not sure why you did a search when you have already been to the IRD and they have given you the answer. The bit in bold answers your question.

The only time the proceeds of 'selling a right' would be taxable, would be if you bought those rights with the intention of selling them to make a profit
It's the same deal with head shares.

SNOOPY

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Cheers Snoop, obvious now you point it out.