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Thread ID: 66280	2006-02-17 06:03:00	WFTWE #194....Quaestuary....This one's especially for Metla....	Billy T (70)	PC World Chat

Post ID	Timestamp	Content	User
431421	2006-02-18 13:34:00	Actually... to backtrack a bit, and use my personal example... I do what i do... sound work, because i love it. Money turned over and reinvested in new toys is merely a tool to make what i do better. I see it as a business because it has all that boring money stuff, but more so a lifestyle choice. The primary aim is not to make money, it is to do what i do well. Turnover of money is almost a side effect. To say i do it to make money is as rediculous as saying i do it to consume electricity. Conclusion: It is very possible to have a small biz whose not there to make money, but for other creative reasons.	personthingy (1670)
431422	2006-02-18 19:33:00	There was a case of a person whose hobby was deer hunting. Some weekends he would shoot a deer and others he wouldn't. On occasion he would sell parts of the deer to cover the costs of the hobby. The IRD tried to assess him for tax, he objected, it went through the courts and the IRD lost. Conclusion : hobbies are not taxable. In your case I would recommend professional tax advice before embarking on an aggressive tax stance. Such a stance only comes back to bite you. Andrew	andrew93 (249)
431423	2006-02-18 20:50:00	In response to Billy's last post, the IRD take the view that a venture designed to make losses does not fit the definition of a 'business' (see above) so accordingly it can't claim the expenses / deductions. Andrew There's more than one "liquidated" property developer out there living the high life on his business gains who might disagree with your analysis Andrew (thinking of a well known rugby/league personality in particular), and there have been several "Tax loss business" schemes that IRD have failed to prosecute successfully. Where there's a will, there's a way, even if it is on the outer fringes of legality. Cheers Billy 8-{)	Billy T (70)
431424	2006-02-19 01:01:00	Hi Billy A fair comment but bear with me while I relate a story. The IRD have been pursuing a local Chartered Accountant / tax agent who set up a number of loss making schemes in the 1990's (his name eludes me for the moment but he is being dragged unceremoniously through the courts). He reputedly told his clients he would "wave his magic hands" to make the tax bills disappear (I just love that line and the image it conjures up, to the point where it is now a running joke with a number of clients). Whilst he was a favourite with his clients, his clients' tax obligation statistics didn't compare favourably with the rest of the country and he was duly audited. The clients didn't know what the accountant was up to and preferred not to know (BTW the standard line of "No tax! I don't want to pay any tax!" really does become tiresome after a few years). I'll bet each one of them now wishes they knew what was going on. Every single loss making entity that was set up by this fellow has been successfully attacked by the IRD and consequently almost every single client on this fellows books has also been audited and assessed for back taxes plus penalties, where he brought them into these schemes. As I said earlier, these sort of schemes come back to bite you and very often it is a really nasty bite. Even if the IRD are unsuccessful with an attempt, they often get you on something else. On the subject of property developers, they are currently on the IRD 'hit list' (farmers take note too : they are watching and waiting for you to subdivide your land!) so it's only a matter time before individuals who have something to hide are caught. However, property developers use limited liability companies for two main reasons. Firstly, each project is set up under a limited liability company. Once the project is complete the company is liquidated. They do this to avoid post-construction liabilities (i.e. leaky buildings). The second reason they use companies (as with the personality you mentioned) is to walk away from problem developments without losing their shirt (and home, boat, car and bach etc). In other words they are relying on the limited liability aspect of the company to preserve their personal wealth. There aren't any sensible reasons from a tax perspective to have losses inside a limited liability company because the losses are 'stuck'. The only (legal) way around that is to have an LAQC but then you have to give a personal guarantee to the IRD, so it nullifies the limited liabilty aspect wrt the IRD. So back to your point of the developers 'living the high life on {snip} business gains' - this won't be form a loss making venture. It is probable the gain is either a genuine profit (which is ok) or the gain was acquired through less than scrupulous means (i.e. they cheated in some way). If this is the case then there would be recourse available to the disaffected party through the legal system (in theory, Winston can correct me there). I won't bore you by banging on about it but be aware there is plenty of mis-information and half truths when it comes to how little tax some people pay. I take most claims of 'getting away with it' with a grain of salt. The IRD have been in business a lot longer than the rest of us put together, so there is hardly a scheme or attempt at tax evasion / avoidance they haven't seen. Just my thoughts Cheers, Andrew	andrew93 (249)
431425	2006-02-20 01:37:00	Agreed Andrew, great post. As you know (better than I) there are ways of minimising tax. But it can be a fine line between evasion and legitimacy. Good accountants explain that and work on the right side of the line. We see tax schemes from time to time and avoid them. The IRD has unlimited resources to chase you if the scheme turns out to be just that bit too clever. ;) The wealthy individuals whom we see enjoying the high life while their businesses burn around them (anybody remember Goldcorp, Chase, Euronational etc?) are sometimes personally bankrupt. But they moved assets to a Trust, unassociated company, the wife, or children/brother-in-law etc years before the excrement hit the rotating device. All quite lawfully. We can all set up these structures but most don't.	Winston001 (3612)
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