Hanover investors can claim tax loss - IRD
Hanover investors in the debt-for-equity swap with United Finance/Allied Farmers may get a tax break on the deal.
If investors took part in order to sell the shares they acquired, they can possibly claim the losses which then eventuated, IRD group tax counsel Graham Tubb said this morning.
Taxpayers would have to demonstrate they acquired the shares in order to resell them, he said. The tax situation is the corollary of if the shares had increased in value: in that case, the taxpayers would be paying tax on that increase.
“This has been a slightly unusual situation and the same outcome would not apply for people who had lost money in other finance company collapses,” Mr Tubb said.
“However, we accept that in the case of people who participated in this debt-for-equity swap, that purpose or intention can best be demonstrated by the steps put in place to sell the shares as soon as they were issued.”
Not everyone who took part in the swap deal, which happened at the end of 2009, would get a tax benefit, Mr Tubb said.
“Not every sale of the shares at a loss will be deductible and people should consider talking to us about it. The Commissioner has the discretion to amend a taxpayer’s assessment where it is necessary to ensure the correct amount of tax is paid.
“The amount of the deduction that may be claimed is likely to be less than the amount that investors may have invested with Hanover and/or United. The loss will be calculated based on the price for which the shares were issued, which we believe was 20.69c less the amount received from the sale, and any fees or commissions incurred.
“However, our message is that people should contact us to discuss their situation.”