Calkin v. Commissioner of Inland Revenue

[1984] 1 NZLR 440

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(Decision by: Somers J.)

Calkin
vCommissioner of Inland Revenue

Court:

Judges: Cooke J.
Richardson J.

Somers J

Subject References:
Income tax
Deductions
Misappropriations by agent
Taxpayer had been the victim of a confidence trick and had suffered a nett loss of $89,500
Taxpayer had believed that his money was being used by a person who was acting as his agent to buy and sell various assets for a profit with the agent taking a 10% commission
Agent turned out to be a confidence trickster and the transactions were fictitious
Whether the taxpayer was engaged in a business
Whether there had been an 'undertaking' carried on for pecuniary profit
Whether taxpayer's net loss was deductible for income tax purposes
Whether s 129CF allowed the deduction of a capital loss
Discussion of the distinction between fact and law in tax cases

Legislative References:
Land and Income Tax Act 1954 - ss 2, 111 and 129CF.

Case References:
Inland Revenue (Commissioner of) v Parson - [1968] NZLR 375.
Lowe v Commissioner of Inland Revenue - [1981] 1 NZLR 326

Hearing date: 3 February 1984
Judgment date: 10 May 1984

Wellington, New Zealand

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Decision by:
Somers J.

The simple primary facts of this case have been sufficiently set out in the judgments of Cooke and Richardson JJ. Although the memorandum of grounds of appeal were more extensive Mr Molloy for the taxpayer limited his submissions to the claim that the taxpayer was carrying on a business, that the expenditure or outlay claimed as deductible was made in the carrying on of that business, and that the deductions were justified either under s 111 or under s 129CF of the Land and Income Tax Act 1954.

The transactions or undertakings into which the taxpayer intended to enter were the purchase of property and its resale at a profit. But as no actual transaction ever took place there is no material upon which to found the inference that such a business (or indeed any business or undertaking for profit) was carried on. It is not possible to describe its nature in such a way that the transfer of money to Mrs Pilmer was itself a business. She was but the taxpayer's agent.

Such a conclusion, as Mr Molloy recognised, is fatal to the taxpayer's case.

I would dismiss the appeal.

Solicitors for the appellant: Oliphant, Bell & Ross (Auckland).

Solicitors for the respondent: Crown Law Office (Wellington).

A P Molloy for the appellant.

J R F Fardell for the respondent.

Cur adv vult