Loxton v Commissioner of Taxation (Cth)

High Court of Australia Gibbs, J. Loxton v Commissioner of Taxation (Cth)

ORDER Order Appeal allowed with costs. Matter remitted to the Commissioner to reassess in accordance with the reasons for judgment. Usual order as to exhibits. Gibbs, J

: This is an appeal from a decision of a Board of Review upholding the decision of the Commissioner of Taxation on an objection made by the appellant against an assessment to tax in respect of income derived during the year ended 30 June 1968. The question for decision is whether the Commissioner was correct in treating as assessable income the profit realized by the appellant during that income year on the sale of shares in Planet Metals Ltd ("Metals") and Planet Gold Ltd ("Gold") and the sale of share options in the latter company.

The appellant is a solicitor. He does not trade in shares. The transactions which gave rise to the profit—stated, for the moment, without explanation—were as follows. On or about 24 July 1967 the appellant applied for and was allotted 2000 shares in Metals at 55 cents per share (including a premium of 5 cents) and 1100 shares in Gold at 50 cents per share (being 2 cents money payable on application and 48 cents payable as an immediate call). The total amount paid by the appellant for these shares was $1650. Each of the shares carried two options each of which entitled the holder to take up an additional share at par; in other words, the appellant obtained at no extra cost 4000 Metals options and 2200 Gold options. Between 28 July 1967 and 9 August 1967 the appellant sold the 2000 Metals shares for $857.46, the 1100 Gold shares for $223.87 and the 2200 Gold options for $117.20—a total of $1198.53. He still held the 4000 Metals options and on or about 13 September 1967 he instructed his brokers to exercise those options and to sell the shares at 69 cents. On the exercise of the options he paid the application money due, namely $2000. Of the Metals shares acquired by the exercise of these options, 1700 were sold on 13 September 1967 and 2300 on 5 October 1967; all sales were at 69 cents and the sum yielded was $2699.20. The result of these transactions was that the appellant made a profit of $456.66 on the sale of the Metals shares and a loss of $208.93 on the sale of the Gold shares and options—a net profit of $247.73.