"It is against this economic canvas of chaos and beatings that investors will be seeking any potential redemption from the losses many have now suffered. One possible ray of hope can be found in tax, in terms of claiming for realised losses."
However, Mr Mason warned that the legis-lation was very technical and complicated.
It was important to note that whether tax benefits could be realised would depend wholly on the type of investor you were, and the type of share investments you held.
An investor who had long-term investments, such as investments on capital account, seeking primarily to derive dividend income and long-term growth, would find little solace from taxation in the economic downturn.
Any loss would be on capital account, and non-deductible, but any gains on such would not be taxable, he said.
The outcome would be different if an investor instead purchased shares with the intention of disposing of them.
"This would generally apply in a situation where an investor has perceived an opportunity in the market, and acquired shares for a short-term hold period.
Provided they can demonstrate they had such an intention, they should be able to claim any losses that might eventuate from the sale of these shares. On the flipside, any gains would be income."
The same outcome could apply for a person who was in the business of dealing in shares.
Traders had traditionally been able to claim losses created from selling shares on the basis that any gains would be income.
That continued to apply to NZ shares, but is no longer a given for foreign shares.
It was important to note that the general taxation treatment of the investors listed above might not apply to many overseas investments and shareholdings.
That was because there were new calculation rules for determining income on investments subject to the newly broadened Foreign Investment Fund (FIF) regime.
"The complexity and costliness of applying the FIF rules has been well-documented and is, for many investors, a burden they would rather do without.
"However, if you are a share trader, that burden could be outweighed by the benefits of using the FIF regime calculation methods, particularly the Fair Dividend Rate [FDR] method in a booming market.
But in a downwardly mobile market, the news is not as good as there is deemed income irrespective of economic losses," Mr Mason said.
"While there is some relief available is certain instances under the comparative value method of calculating FIF income, the best one can generally hope for is nil income, not a claim for losses."
So, as a general principle, if investors were share traders, or acquired shares with the clear intention of selling them, then realised a loss on New Zealand shares (and some Australian shares), those losses should be tax deductible.
If the shares were foreign shares subject to the FIF regime, the best outcome achieved would be nil income, he said.
"If the 1987 crash is anything to go by, something tells me that, in hindsight, more taxpayers may have acquired shares with a clear intention of selling/trading. Just a word of warning, though: the burden of proof is on the taxpayer to prove either intent or business."
