FACTS:

Lord is a financial planning adviser for three different NZ tax resident clients: Prince, Queen Ltd and King Trust. Knowing that you are enrolled in an advanced taxation course, he seeks your expertise in analysing the income tax implications related to his clients shareholdings in foreign companies. Provided below is further information about Lords clients.

Prince (an individual) holds shares in an overseas company (not Australian):

- the shares were acquired at a cost of $45,000;

- on 31 March 2022, market value of the shares was $50,000;

- on 31 March 2023, market value of the shares was $55,000.

Queen Ltd (a company) holds shares in an overseas company (not Australian):

• the shares were acquired at a cost of $45,000;
• on 31 March 2022, market value of the shares was $55,000;
• on 31 March 2023, market value of the shares was $65,000;
• during the year ended 31 March 2023, Queen Ltd bought an additional 3,000 shares for $44,000 and later sold 2,000 shares for $42,000.

King Trust

- is a complying trust which was set up by Harry King in 2010 for the benefit of his children

- the trust holds a portfolio of shares with a total cost of $110,000

- the portfolio includes:

- $30,000 cost of shares in Australian listed companies (ASX listed);

- on 31 March 2022, market value of the shares was $33,000;

- on 31 March 2023, market value of the shares was $35,000;

- $80,000 cost of shares invested in two UK-listed companies: Corgi PLC and Spaniel PLC.

Additional information about Corgi PLC and Spaniel PLC is as follows:

Corgi PLC:

• market value was $60,000 on 31 March 2022;
• market value was $ 65,000 on 31 March 2023;
• King Trust bought another 500 shares for $4,000 on 28 June 2022. Dividends

of $600 were received on 30 September 2022.

Spaniel PLC:

• market value was $38,000 on 31 March 2022
• market value was $27,000 on 31 March 2023
• King Trust sold 2,000 shares for $8,000 on 1 July 2022 which originally cost

$3,000 two years ago.

All three clients have no other investments apart from these shareholdings. Their shareholdings in the foreign companies were all less than 10% and all shares are ordinary shares.

REQUIRED:

ISSUE 1: Which of the above foreign investment(s) does (do) not require a FIF income calculation in the 2023 income year? (20 marks).

Use the following template to answer Issue 1. Please do not change the formatting. No calculations are required for this part. Indicate Y (Yes) or N (No) if you think a FIF calculation is required or not required respectively. Provide a short reasoning for indicating Y or Nand also give section references to support your reasoning.

Client	Y/N	Reasoning	Section References
Prince
Queen Ltd
King Trust
Marks: /20

ISSUE 2: Which of the five FIF methods Queen Ltd can use for its foreign investments? (20 marks).

Use the following template to answer Issue 2. Please do not change the formatting. Indicate Y (Yes) or N (No) as to whether each of those methods can be used. Provide a short reasoning for indicating Y or Nand also give section references to support your reasoning.

Method	Y/N	Reasoning	Section References
Fair dividend rate
Comparative value
Cost method
Deemed rate of return
Attributable FIF income
Marks: /20

ISSUE 3: What is the Foreign Investment Income (FIF) income for 2022-23 for King Trust? Show all workings for the methods that can be used by King Trust (60 marks).