GOVERNMENT STOCK SALES

Dominion, Volume 29, Issue 252, 21 July 1936, Page 12

GOVERNMENT STOCK SALES

Apportionment Between Capital and Income At the quarterly meeting of the council of the New Zealand Law Society, the committee appointed to confer with representatives of the New Zealand Society of Accountants regarding the apportionment between capital and income on the sale of Government stock reported that following a very full discussion of the legal and accountancy aspects of this question, it was unanimously decided to recommend to the councils of each society that the law be amended. The present law was stated in the committee’s report of June 17,' 1935, which can be supplemented in two respects. The Legislatures of Victoria and New South Wales have directed apportionment to be made by trustees in certain cases, namely, on the sale or purchase, of debentures or inscribed stock bearing interest at a fixed rate. In New Zealand by section 8 of the Land and Inepme Tax Amendment Act, 1935, the commissioner may apportion between transferor and transferee interest due or accruing due on any security transferred.

An a result of the conference the committee io satisfied that an amendment of the law is essential. In many cases where the law is strictly observed hardship is caused to life tenants. In many’ other cases the Jaw is disregarded by trustees either through ignorance or for the purpose of avoiding injustice to life tenants. The committee is also satisfied that whatever difficulties might have faced trustees in early days, had they been required to apportion, these difficulties have largely disappeared in times when estate accounts are normally kept in the offices of trust corporations, of solicitors or of public accountants.

The meeting with the representatives of the New Zealand Society of Accountants. considered that the Australian requirement of apportionment in some cases and not in others would create confusion and further anomaly. For instance on the conversion of company shares into authorised trustee investments it would almost always be inequitable and mischievous to apportion the purchase price which was paid but to refuse to apportion the purchase price which was received.

The amendment of the law which in the committee's opinion is required is to direct a trustee in all cases of h sale of trust property or a purchase out ot trust funds to apportion the moneys paid or received between capital and income in such manner as he thinks equitable. The apportionment must be' in the absolute discretion of the trustee, who may, if be feels embarrassed, apply under section io of the Trustee Act for directions. This would bring our law into conformity with Scotch law, which is set out in the articles circulated with the original letter from the solicitors to the Society of Accountants. A report is to be presented early in June to the New Zealand Society of Accountants referring to specific instances of unfairness and anomaly arising from the present law. It is hoped that a copy of this report will be available for the next meeting of the council. The New Zealand Society of Accountants wrote that it agreed with the recommendations suggested and if the council of the Law Society approved of the report it was suggested that representatives of both societies approach the At-torney-General urging the necessary amendment. Mr. Watson thought the council should be slow to take action, as many difficulties would arise.' What would happen with shares in companies where dividends were due three months after death?

Mr. I). Berry said that, ns one of the committee, he could not at first see why any alteration in the law was necessary, but he was convinced after the discussion with the accountants' representatives, who gave instances of grave injustice caused by the present position. On the motion of Mr. J. B. Johnston, it was unanimously decided that the report should be adopted and that steps should be taken to obtain the necessary amendment.