Published 22 September 2010
Inland Revenue has backed up its win over property developer Andrew Krukziener at the Taxation Review Authority with another win in a High Court appeal, but still may fall well short of getting its money.
Mr Krukziener said yesterday he hadn’t decided yet on a further appeal, but said Inland Revenue’s victory in the High Court case heard by Justice Patricia Courtney wouldn’t alter his debt-compromise scheme with creditors.
“In my compromise, I had them in there on the basis that they’re going to win, because at the time we lodged our proposal we’d lost at the Taxation Review Authority.”
One of the issues in the case before Justice Courtney concerned money Mr Krukziener received from a trust, which Inland Revenue counted as income. His lawyer, Mike Lennard, said Mr Krukziener borrowed from that trust up to 1996, but other trusts owed him money. “It wasn’t tax avoidance. There were no available profits – a loan is neither income nor capital gained…. There were capital profits realised from sale of investment properties.”
However, the judge said the effect of the arrangement was clearly tax avoidance, at least in the sense of deferring the tax obligation.
Mr Krukziener’s insolvency scheme and Inland Revenue’s bankruptcy application are due back in court on Tuesday 12 October for mention, with a 2-day Auckland High Court hearing set down for Wednesday-Thursday 17-18 November.
Mr Krukziener has proposed a $250,000 payment in 2½ years, followed by 2 payments of $50,000 over the next year. In court in April, Mr Krukziener’s lawyer, Lawrence Herzog, said the debt compromise covered debts estimated at $50 million, but 64% of that was secured so the overall 0.7c:$1 payment estimate was likely to be well short of actual payment. Mr Herzog said the figure was more like 2.7c:$1 – and Mr Krukziener said, back in his office after the hearing, the eventual payment was likely to be in double figures. He said most of the eventual debt would be tax, but nowhere near the $6.7 million Inland Revenue was claiming.
U: The names behind the action, the week to 13 June 2010, part 1, Krukziener insolvency proposal application adjourned, tax appeal also in court
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Attribution: Judgment, phone interview, story written by Bob Dey for the Bob Dey Property Report.