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Income Tax Act 2007

Taxation of certain entities - Joint venturers, partners, and partnerships

HG 9: Disposal of short-term agreements for sale and purchase

You could also call this:

“Tax rules for selling part of a business that includes short-term sale agreements”

When you sell your share of a partnership that includes a short-term agreement for sale and purchase, there are special rules about how this is taxed. The money you get for the short-term agreement isn’t counted as income for you. You can’t claim any deductions for it either. The person buying your share can’t claim a deduction for what they paid you for the agreement. After the sale, the new partner is treated as if they had owned the agreement from the start, not you. They can claim deductions for it in the future. These rules don’t apply to small partnerships covered by section HG 3(2). Also, section HG 4 takes priority over these rules if there’s any conflict.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1185085.

Topics:
Money and consumer rights > Taxes
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Part H Taxation of certain entities
Joint venturers, partners, and partnerships

HG 9Disposal of short-term agreements for sale and purchase

  1. This section applies when a person disposes of some or all of their partner’s interests in a partnership, to the extent to which those interests include a short-term agreement for sale and purchase.

  2. The amount of consideration paid or payable to the exiting partner for the short-term agreement for sale and purchase is excluded income of the exiting partner.

  3. The exiting partner is denied any deduction in relation to the short-term agreement for sale and purchase, to the extent to which the entering partner is allowed a deduction because of subsection (5).

  4. The entering partner is denied any deduction for the amount of consideration paid or payable to the exiting partner for the short-term agreement for sale and purchase.

  5. For the purposes of calculating the income tax liability of an entering partner for the part of the income year after the disposal of the short-term agreement for sale and purchase occurs and later income years (the post-disposal periods), the entering partner is treated for the post-disposal periods as if they had originally acquired and held the short-term agreement for sale and purchase, not the exiting partner.

  6. This section does not apply for the partners of a small partnership if section HG 3(2) applies.

  7. Section HG 4 overrides this section.

Notes
  • Section HG 9: inserted, on , by section 19(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
  • Section HG 9 heading: amended (with effect on 1 April 2008), on , by section 275(1)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(1): amended, on , by section 138(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section HG 9(1): amended (with effect on 1 April 2008), on , by section 275(1)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(2): amended (with effect on 1 April 2008), on , by section 275(1)(c) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(3): amended (with effect on 1 April 2008), on , by section 275(1)(d) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(4): amended (with effect on 1 April 2008), on , by section 275(1)(e) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(5): amended (with effect on 1 April 2008), on , by section 275(1)(f) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9(6): amended (with effect on 1 April 2008), on , by section 275(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9 list of defined terms disposal: repealed, on , by section 138(2)(a) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section HG 9 list of defined terms dispose: inserted, on , by section 138(2)(b) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section HG 9 list of defined terms exiting partner: inserted, on , by section 138(2)(b) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
  • Section HG 9 list of defined terms short-term agreement for sale and purchase: inserted (with effect on 1 April 2008), on , by section 275(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section HG 9 list of defined terms short-term agreement for the sale and purchase of property or services: repealed (with effect on 1 April 2008), on , by section 275(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).