The facts of this case were that the taxpayer (and three others in partnership) entered a complex scheme, which involved the partnership, and annuity and loan arrangements. The scheme was financed through a series of “round robin” cheques and promised substantial deductions in the first five years of the 15-year plan. A number of documents were exchanged but no cash payments were made. This was calculated to return neutral cash flows with high tax deductions initially and high assessable income, especially in the last five years. A feature of the scheme was that there was an opportunity to terminate it in the last five years. In the relevant year the partnership derived assessable income of $170,000 and claimed deductions of $360,000.The issue before the court was whether the taxpayers were entitled to a deduction for interest.

+ Recent posts