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FARM CLEARING SALES.

PROFITS ON LIVE STOCK. TAXABLE AS INCOME. NOT “ACCRETION OF CAPITAL.” That, appreciation of live stock is equivalent to profit and therefore taxable is the conclusion of the Full Court upon an appeal against an assessment of income tax by George Edward Anson. The appellant was for several years the owner of a sheep station near Hunterville, where he maintained a flock- of about 6000 sheep. In July, 1919, he soldjthe stock for £9650. In his income tax returns for previous years he had, with the approval of the Commissioner for Taxes, adopted the practice of placing on his sheep, as at the beginning and end of each year, an arbitrary value without reference to the actual market value at the time.

That practice, said the Court, was adopted as one of practical convenience, and, on the assumption that in the long run it made no difference to the aggregate amount of income returned or income tax payable. The standard value so adopted by the appellant was, as the event proved, much less than the actual value of his stock. Thus the stock shown on the appellant’s income tax return as in June, 1919, was valued by him at only £3776, whereas he sold that stock in July for £9650. He showed accordingly a nominal profit of £5874 on this sale, and for that amount he had been assessed for income tax in respect of the income year 19191920. THE CONTENTIONS REJECTED. Appeal was made against this assessment on two grounds. It was contended that > the profit on the sale was not taxable income, but merely an accretion of the capital which was represented by the permanent flock of 6000 sheep The appellant maintained that the gradual increase in the capital value of this flock was no more taxable income than was the gradual increase in the capital value of the land itself on which his business was carried on. The second and alternative contention was that even if the profit on the sale of the sheep was taxable income, it was not properly attributed exclusively to the year in which the flock was sold, but represented the accumulated profit of the preceding years during which his flock was progressively increasing in value, and, therefore, that the profit should be apportioned between those years.

The Court was of opinion that neither of those contentions could be upheld. “The flocks of a sheep-farmer are his stock-in-trade,” the judgment ran, “just as truly as is the merchandise of a shopkeeper. A sheep-farmer’s business is or includes the selling of his sheep at a profit, just as the business of a draper is to sell his drapery at a profit. Every appreciation of stock-in-trade represents a profit assessable for income tax, just as every depreciation represents a loss deductible in an assessment of such fax. In this respect stock-in-trade is 'essentially different from fixed capital, the appreciation or depreciation of which is irrelevant in questions of income tax. Stock-in trade consists of rhe property which is acquired for the purpose of deriving a profit from such use — such as lauds, buildings, mines, machinery and plant. DEFINED AS STOCK-IN-TRADE. “It makes po difference in this respect v?bether a taxpayer’s stock-in-trade is purcl . by him or is manufactured or otherwise produced by him, or are natural product of other sheep belonging to him, they are equally his stock-in-trade—the sale of them being the appointed instrument of his profit. “Nor does it make any difference whether a taxpayer’s stock-in-trade is sold progressively in the norma! course of business, or is sold all at once by way of a clearing sale or otherwise in connection with a transfer or winding-up of the business. Whether his profit is derived from a single sale of all his stock-in-trade at once, or from repeated sales in the ordinary way of his business, his profit is taxable income, assessable accordingly.”

Permanent link to this item
Hononga pūmau ki tēnei tūemi

https://paperspast.natlib.govt.nz/newspapers/TDN19211025.2.63

Bibliographic details
Ngā taipitopito pukapuka

Taranaki Daily News, 25 October 1921, Page 8

Word count
Tapeke kupu
652

FARM CLEARING SALES. Taranaki Daily News, 25 October 1921, Page 8

FARM CLEARING SALES. Taranaki Daily News, 25 October 1921, Page 8

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