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8 Aug 2018 (AFR) – Lessons from investor’s attempt to claim $11m in share losses against income

[COMMENT: This news story covers a perplexing topic that frequently puzzles (share market) investors and traders – How do we account for the proceeds from trading activities?  Is it regarded as income, or a capital gain? This is a very grey area with accountants offering differing opinions from time to time. This news article reports on a real court case which tested the law.]]

(8 August 2018, AFR, p32, by Joanna Mather)

‘Are those investment returns on revenue or capital account? It’s a vexed and enduring question in the personal income tax sphere. Former Bechtel executive Andy Greig recently discovered the answer the hard way, when he unsuccessfully sought to claim $11.85 million in share losses as deductions against his income.’ <snipped…>

‘The Federal Court disagreed. It said Mr Greig was an ordinary investor who incurred a capital loss; a big loss, yes, but one no different to the countless people who bet daily on the sharemarket and lose.’ <snipped…>

‘The distinction between an income receipt and capital receipt is critical for determining tax outcomes, but is not always straightforward. Profit-making venture – Income is generally regarded as regular, recurrent or periodical. A good example is dividends from shares. On the other hand, a capital gain or loss is the difference between an asset’s purchase price and the price for which it is sold, minus any costs.’ <snipped…>

‘ “Interestingly, the ATO’s usual approach to people who speculate on shares is to treat them as being on capital account, like the way they did for Mr Greig,” William Buck director of tax services Ian Snook says.’

Read more at AFR.com (might need AFR login access, or try: AFR.com/trial)

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About robertbrain

Brainy's Share Market Toolbox. Read the honest truth about the sharemarket. Develop or fine tune your investing/trading strategies using share price charts (technical analysis), or learn about the investment strategies of others. Melbourne (Australia) based - supporting share market investors and traders to build wealth through smarter investing using my Share Market Toolbox arsenal of weapons to tackle the market.

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