LAND AND INCOME TAX

Dominion, Volume 14, Issue 242, 7 July 1921, Page 5

LAND AND INCOME TAX

A LECTURE FOR STUDENTS. "Land, and Income Taxation” was the subject of a lecture given by Mr. E. L. Enting before the Wellington Accountant Students’ Society last night. The lecturer stated the legislation relating to land and income tax, and explained some of the provisions governing the making of returns by the taxpayer. The profit and loss of a business man and an income tax return were not by- any means the same documents. Various items that might appear in one document were not included in the other. Certain exemptions were allowed for income tax purposes, and some items that might be included in a profit jand Joss amount did not appear in an incomfe tax return. The income for taxation purposes included the total amount earned, whether received or not, but under certain circumstances a claim might be made subsequently in inspect of bad debts. AH tho income of al business was assessable for income tax, but the income did not include casual profit, or capital receipt. Money received from "Tatts.,"’ for example, was a capital re- ; eeipt, and was not assessable for income tax purposes. Profit made on the sale of a house need not be returned as income, unless the person coriSerned was making a business of buying and selling houses. A house allowance was not assessed for income tax, even if paid) in cash, nor was an allowance for board and lodging. A person was not assessed for income tax on a profit made on the sale of land, unless it could be proved that ho was making a business of eell-. ing land, or that he had bought the land for speculative purposes. An assessment of a profit on the sale of land would include as income any mortgage taken by tho seller. A farmer was allowed to fix. his own valuation of stock when making hia returns, but when he sold out he 1 waa assessed on any profit shown in the sale of his live stock and produce. If he had made a low valuation, he would hav e a big profit to show and a big tax to pay when he sold out. Any profit derived from the use and sale of leaves was assessable, but flax roots wero>. treated as. a part of the land, and were included in the unimproved value. 1 The lecturer mentioned many other' details and interpretations. He said that Income derived from "free-of-income-tax” war bonds and from the debentures of local authorities was not returnable by tho taxpayer. The local authority under, the 1920 Act acted as agent ot the de-, benturo holders, paid the taxation on their behalf, and deducted it from divi-' dends. A commercial traveller’s travel-i ling expenses were allowed as a deduc-' tion from income, but the cost of a trip' abroad in search of new agencies or of information about methods was not de-i ductable, the amount being regarded asi a preliminary expense. The cost of a? journey undertaken for the purchase of: stock could ‘bo deducted from assessable income. Deductions for depreciation were fixed by a scale of percentages, but' it should bo remembered that an ad- ! justment could be made if realisation showed that depreciation, due to wear and tear or to obsolescence, had actually, been greater than the allowance. Voluntary donations and subscriptions, l gratuities paid to the widow of an enw ployee, or payments to superannuation funds for the benefit of employees, were, among the charges not allowed as deductions. The 1920 Act made a distinc-. tion for the first time between eu’-ued. and unearned income, and the h cturer was disposed to expect trouble in the interpretation of this provision. All de-, ductions, except the 5 per cent, deduc-; tion allowed on the unimproved value of land, had to bo mado from the earned; income, unless the. total deductions ex--' ceeded the earned income. Mr. Enting' explained how the various provisions' of the income tax law would operate by. quoting suppositious cases. De dealt also with the land tax, and emphasised the special provisions intended to prevent evasion of land tax by bogus s-üb-' division of land. The lecturer was accorded a » earty vole of thanks after he had answered some questions .put by students.