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Taxpayer not assessable on sale of land acquired with intention of resale

The High Court decision in Junior Farms Limited v CIR (CIV-2009-404-2870, Brewer J, 22 July 2011), while perhaps a “fair” result in the circumstances of the case, is difficult to sustain by reference to the Income Tax Act 2007. That said the decision may prove useful for any advisor or trustee where a tax event has arisen following an unintended resettlement.

The case is simple on its face. Junior Farms Limited owned a large block of un-subdivided land that had been rezoned light industrial and flood plain. The entire block of land together with all plant and livestock was sold for $2.681m pursuant to an agreement dated 9 November 1994. In a subsequent agreement between the same parties, dated the following day, the purchaser was to sell the flood plain portion of the land back to the Junior Farms for $100 following a planned sub-division. At the time of the transaction the flood plain land was worth approximately $1.9m.

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