英國(guó)稅法留學(xué)生畢業(yè)dissertation Taxpayer's Notice of Proposed Adjustment

Taxpayer's Notice of Proposed Adjustment

Issued under section 89DA of the Tax Administration Act 1994

Taxpayer's name: Davenport Investments Limited

IRD number: 555–123–456

Date of issue: 31 July 2008

Proposed adjustments

The items in dispute have to be described in detail, usually by tax type and period [in this case prepared for each relevant income year

Identify the adjustment or adjustments proposed to be made to the assessment.

Description and calculation of the gross and tax effect of the proposed adjustment(s):

Expenditure incurred on investment property located at 33 Smith Street:

Expenditure not claimed previously for maintenance in 2006 income tax year $ 2,500

Interest expenditure previously not claimed in 2006 income tax year $ 12,150

Fee from XYZ Lawyers in assisting with property $ 500

Valuation fee previously not claimed $ 300

Total: $ 15,450

Tax overpayment (33% of proposed adjustments) $ 5,098.50

Total tax to be refunded [or to be paid, as appropriate] on proposed adjustments: $ 5,098.50

[This summary needs to be prepared for each relevant income year.]

A concise statement of the key facts relevant to the proposed adjustment(s)

In the next two sections provide a statement of the facts and the law in sufficient detail to inform the Commissioner of the grounds for the disputant's proposed adjustment or adjustments.

In the facts section of a Notice of Proposed Adjustment, the facts which support the adjustments proposed have to be set out.

On 1 July 2005, Davenport Investments Limited purchased a domestic property in Christchurch to rent. Property has been purchased with an intention to hold long term for capital gain purposes.

The property (brick house and land) had a cost of $400,000. The purchase price was financed partly from capital already held by Davenport Investments Limited ($220,000) and partly with an interest-only mortgage of $180,000 (the interest rate is 9% pa).

Deductions have not been claimed by Davenport Investments Limited for these expenses as previous advice received had indicated that these expenses were not deductible.http://www.ttc-switch.com/dissertation_writing/Law/

This Notice of Proposed Adjustment is to initiate the amendment of the original tax returns filed by Davenport Investments Limited.

In February 2006 Davenport Investments Limited had the two bedrooms repainted and also replaced the guttering and down pipes (with the same type of material). Davenport Investments Limited received an invoice for $2,500 for the entire work at that time. For cash flow reasons Davenport Investments Limited paid $2,000 in March 2006 and the balance in April 2006. Due to incorrect advice these items were not included as deductions in the preparation of the 31 March 2006 Income tax accounts.#p#分頁(yè)標(biāo)題#e#

The balance of the purchase price for the property ($180,000) was financed by an interest-only mortgage of $180,000. The interest rate was 9% pa. Davenport Investments Limited's lawyer's fees for assisting with arranging the mortgage were $500 and a valuation fee of $300 (as required by the bank to provide the facility) was also incurred at this time.

[Detail the facts in relation to each relevant transaction for each relevant income year.]

A concise statement of the law relevant to the proposed adjustment(s)

Tax laws are the provisions of the tax act which support the adjustment. This must be a reference to a provision in the Income Tax Act, GST Act, or other Revenue Acts.

 Repairs and Maintenance of the guttering and down pipes, and painting the bedrooms:

 s DA 1(1) ITA 2007 unless it is capital expenditure: s DA 2(1) ITA 2007.

Court's three-step test:

(i) The asset or unit is the house.

(ii) Ascertain the extent undertaken on the asset and (iii) Whether the asset has been improved or the work has been confined to remedying repairs and maintenance.

Auckland Gas Co Ltd v CIR (2000) 19 NZTC 15,702.

Apportionment see: CIR v Glen Eden Metal Spinners Ltd (1990) 12 NZTC 7,270, CIR v Mitsubishi Motors NZ Ltd (1995) 17 NZTC 12,251.

Interest:

 General permission (s DA 1(1)) is satisfied: s DB 6 ITA 2007.

Pacific Rendezvous Ltd v CIR (1986) 8 NZTC 5,146

CIR v Brierley (1990) 12 NZTC 7,184

Legal fees and valuation fees:

Section DB 5(1) ITA 2007.http://www.ttc-switch.com/dissertation_writing/Law/

How the law applies to the facts regarding the proposed adjustment(s)

The legal issues are the questions arising from the proposed adjustments, including the application of the tax laws the proposed adjustment is based on. The relevant sections of the legislation must also be stated. Several issues may be raised regarding one proposed adjustment.

A proposition of law is a statement regarding the application of the law. It may be based on statutes (tax laws), case law or other opinion such as those drawn from texts. Wherever possible you should state the authority for the proposition of law relied upon e.g. the particular case it is drawn from.

Propositions of law may also include a statement on the application of law that has not been previously considered by the courts.

 Repairs and Maintenance of the guttering and down pipes, and painting the bedrooms:

 This expenditure is deductible under s DA 1(1) ITA 2007 unless it is capital expenditure: s DA 2(1) ITA 2007.

Considering the court's three-step test:

(i) The asset or unit is the house.

(ii) Ascertain the extent undertaken on the asset and (iii) Whether the asset has been improved or the work has been confined to remedying repairs and maintenance: The expenditure is simply replacing worn out parts (guttering and downpipes) and similarly the repainting is maintaining the bedrooms in a good condition (and arguably is recurrent expenditure). There has been no improvement in the asset - its function remains unchanged. See, for example, Auckland Gas Co Ltd v CIR (2000) 19 NZTC 15,702.#p#分頁(yè)標(biāo)題#e#

No apportionment is required. The entire repair work was carried out during the 31 March 2006 income tax year. There is therefore a definite commitment to pay the entire amount and it is all deductible (including the $500 paid in April) in the income year ending 31 March 2006: CIR v Glen Eden Metal Spinners Ltd (1990) 12 NZTC 7,270, CIR v Mitsubishi Motors NZ Ltd (1995) 17 NZTC 12,251.

 Interest:

 A deduction is allowed for interest if the general permission (s DA 1(1)) is satisfied: s DB 6 ITA 2007. Reference should also be made to the Pacific Rendezvous Ltd v CIR (1986) 8 NZTC 5,146 and CIR v Brierley (1990) 12 NZTC 7,184 decisions. In these cases a deduction for interest was allowed as the funds borrowed were used for generating income even though the purpose of the expenditure was also to obtain a capital profit.

 In this case, the interest on the mortgage over the rental property is deductible as the borrowings have been invested (in a rental property) to produce income (irrespective of Davenport Investments Limited's purpose of making a capital gain). This expense would be deductible for 9 months from the date of purchase.http://www.ttc-switch.com/dissertation_writing/Law/

 Legal fees and valuation fees: A deduction is allowed for expenditure incurred in borrowing money that is used as capital in deriving a person's income: s DB 5(1) ITA 2007. The following expenses are normally deductible under s DB 5(1) in borrowing money (whether by way of mortgage etc): Legal fees; Bank fees and charges; Valuation costs, if required by the lender for security purposes; Costs of registering a mortgage.

 When a loan is raised, the question of deductibility of associated borrowing costs is considered – the deduction for these costs is not automatic. To determine the deductibility or otherwise of any such expense, a useful test is to ask: "Is a deduction allowed for the interest payable?”

 If so, expenses incurred in borrowing the money will also be deductible. If the interest itself is not deductible, then the borrowing expenses are likewise not deductible. Thus, if the borrowed money is employed as capital for a private purpose, no deduction will be allowed for the interest and the borrowing costs. It appears on the basis of the conclusion concerning interest (see above) that the legal and valuation expenses incurred by Davenport Investments Limited will also be deductible.

 [This detail needs to be provided for each relevant transaction for each relevant income year – note that if the same items are used for more than one transaction you need not repeat the same information but refer back to the relevant prior discussion.]

 Copies of documents would usually be attached here. For this Research Project there are no documents to be supplied to Inland Revenue. All research / relevant information will be included in the Research Evidence file to be handed in.