This article examines two recent New Zealand cases to see what guidance they provide on the capital-revenue distinction, one of the most complex areas of New Zealand's tax law. The first case is the decision of the New Zealand Court of Appeal in Fullers Bay of Islands Ltd v. CIR, which concerned the tax treatment of the legal expenses incurred by the taxpayer in unsuccessfully seeking compensation for the unlawful acts or omissions allegedly committed in the course of a tender process the taxpayer was involved in. The overall approach of the New Zealand High Court in this case is particularly instructive. The second is the decision in Case X26, heard by the Taxation Review Authority, where the issue was whether the expenditure incurred in earthquake-strengthening a building was deductible. After briefly outlining the legislative setting for the capital-revenue distinction in New Zealand, the article analyses the two cases.