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09 Sep 10 Taxpayer derived income when land transferred - Tagget

The Full Federal Court (Dowsett, Jessup and Gordon JJ) has dismissed the taxpayer's appeal from the decision of Nicholas J, who had held a taxpayer derived income when land was transferred to him (in the 2006 income year), and not at an earlier point in time (in the 1999 income year) when he had entered into a Deed for the transfer of the land (or payment of money representing its market value) subject to the satisfaction of a number of conditions, including the provision of services by the taxpayer.

The Court said, at paras 31-32:

"31 At base, there were only two questions which arose before the primary Judge: in what year was the relevant item of income derived within the meaning of s 6-5(2) of the 1997 Act, and what was the amount of income so derived. A taxpayer who files returns on a cash receipts basis is assessed on the cash received by him or her in the year of assessment because it is the receipt of the cash which constitutes a derivation of income for the purposes of s 6-5(2) of the 1997 Act: see FCT v Dunn (1989) 85 ALR 244, 252 and Barratt at 224-225. In the case of such a taxpayer, it will not be to the point that the right to receive the income accrued in an earlier year. Neither will it make a difference that, in some earlier year, a promise to pay the money may have been made by reference to subsequently occurring events.

32 When the item received on revenue account is property other than money, recourse is necessary to the valuation provisions of the legislation to which we have referred. Section 21(1) of the 1936 Act looks to the occasion upon which the consideration "is paid or given", and requires the money value of the consideration to be determined. Be it granted that the land received by the appellant was so received by way of consideration for services performed by him many years previously, the land was 'paid or given' in [September] 2005, and the money value of it should be determined as at that time."

Tagget v FCT [2010] FCAFC 109 (Full Federal Court; Dowsett, Jessup and Gordon JJ; 8 September 2010).

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