Land Sales : Assessment of Profit When Price Received Includes a Non-Cash Element

The paper deals with the taxation of transactions involving the sale of land where the price received includes a non-cash element, most commonly, a mortgage to the vendor. Generally, such transactions are taxable in New Zealand only when the vendor is in the business of selling properties. The issue is at what point the mortgage is “received” for tax purposes. The paper argues that the true value of the non-cash element should be established at the point when the property is sold. In cases where the vendor has discounted the mortgage, he or she should be able to claim the discount as a deduction from overall taxable income. In cases where the mortgage was sold for more than face value, the vendor should be taxed on its actual value