LAND SYNDICATES

New Zealand Times, Volume XXXIII, Issue 7847, 8 July 1911, Page 1

LAND SYNDICATES

PROFITS LIABLE TO TAXATION ISECISIOX OF APPEAL COtTKT. Whether syndicates purchasing land for subsequent sale in. smaller lots ought to pay income tax ou the piohts derived, by them from the resale was the question involved in two cases which cumo before the Court of Appeal yesterday. This income tax has been pMd ■without question hitherto, but tho two syndicates concerned in these two cases ior the firs£ time raised the question as to whether the Commissioner of Taxes had any right to impose the tax and coll eat it as he claimed. It had been previously held by the court in a similar case against the Miramar Land Company that a company incorporated for tho purpose of making oven ono transaction in land ivas a company formed for tho purpose of dealing in land within the meaning of tho law, and\therefore liable to have its profile taxed. The particular issue was therefore as to whether an association was in a difi’erent position. Tho court was composed oi bir itobert Stout (Chief Justice;, Sir Joshua Williams, Mr Justice Henniston, Mr Justice Edwards, and Mr' Justice Sim, Tho Commissioner of Taxes was, ot course, plaintiff in both cases. Ihe defendants in the one case were 1 1 , G. Pelton, solicitor; It. J. Thompson, auction*eor; L. Hwan, hotel broker; T. B. Dwan, hotel broker;-and Henry Savage, commission agent; and in the other ease 1. Ci. Bolton, Margaret Isabel Bolton, K. J. Thompson, H. Van Staveren, Jewish minister, and C. K. Stuart; accountant. Mr 11. H. 8011, K.C., appeared for the Commissioner of. Taxes, and Mr A. Cray, with him Mr F. G. Bolton, for th« defendants. . , Both of the parcels of. land affected were across tho harbour, at or near Muritai. The block concerned m the first case was 4 acres ‘2 7-10 porches. Bv memorandum of transfer dated January Bth, 1002, the land was transferred "from Hr F. W. Mackenzie by direction of Sarah Augusta Savage, wito of Henry'Savage, to the defendants, who each held a one-sixth share. The lands were subdivided by the defendants tor purposes of sale, and from time to time the allotments were sold, some for cash and some on terms.’ The proceeds of tho sales were divided among tho defendants, ■ The second block was of. seme -T acres situated at Muritai. -IE was purchased for the syndicate in parcels and transferred to it, and then the syndicate divided it into lots of readily saleable size. . , . , The Commissioner of Taxes claimed that the defendants were liable to,-pay income tax upon the profits made by them on tho resale of the land, less such deductions as might be allowed by mm in accordance with the Land and Income Assessment Act, The question tor the court, therefore, was whether the defendants were liable to" pay income tax on the profits derived from their ■ventures? This involved the question as to what Constituted dealing in land. It was submitted that the land was purchased for the purpose of subdivision and resale, and it was contended on behalf of tho plaintiff that this constituted trafficking in land. The defence ■admitted that the object of the purchasing. syndicate in each cose was to make 3 nro'fit somehow, but not necessarily by resale. They might for instance, have ci -veloped the 'land Tint! erected summer "ottages on it, and earned profits in that way. They were not dealers in land because they had bought land, and then, some time later, having finally decided to sell it, sold it at a profit. Tho court hold that the Commissioner was entitled to judgment in both cases, and judgment was entered for plaintiff accordingly. Tho several members of the court, giving judgment, declared tha* there was no distinction beitween the associations, formed as they were for a spe■ific purpose, and a company formed e or the same pnrpose. The contention '■■hat because land speculation was nut ‘ho ordinary business of the members ol he syndicate, their profits were _ liable to taxation, was not sustained iho court holding that an association or syndicate was in.the same position as it the members had formed themselves into a company for land speculation, when admittedly tho profits of the company’s business would have been liable o taxation.

Costs on the lowest scale were allowed in each case.