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Income Tax Act 2007

Income - Income from business or trade-like activities

CB 2: Amounts received on disposal of business assets that include trading stock

You could also call this:

“How to handle money from selling business assets, including stock”

When you own or run a business and you sell some or all of your business assets to someone else, this law applies to you. It’s not about regular sales in your business, but when you’re selling assets to end your business or a part of it. This includes if you’re selling trading stock, which is stuff you normally sell as part of your business.

If you sell trading stock in this way, the money you get from it counts as part of your income for that year. You need to include it in your income at the time you sell it.

The person who buys your trading stock is treated as if they bought it for the same amount of money you sold it for. This affects how they calculate their taxable income for that year or later years.

In this law, selling your assets can also mean giving them away, exchanging them, or passing them on when you die. But it doesn’t include certain types of transfers after death that aren’t sold at market value. You can find more information about those in sections FC 3 to FC 8.

This law is more important than section CB 1 if there’s any conflict between them.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512401.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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CB 1: Amounts derived from business, or

“Money you earn from your business is counted as income”

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CB 3: Profit-making undertaking or scheme, or

“Money earned from planned profit-making activities is considered income”

Part C Income
Income from business or trade-like activities

CB 2Amounts received on disposal of business assets that include trading stock

  1. This section applies in an income year when—

  2. a person (person A) who owns or carries on a business disposes of some or all of the assets of the business to another person (person B); and
    1. the disposal is made outside the ordinary course of the business, or to put an end to the business or a part of it; and
      1. the assets consist of or include trading stock of the business, or a share or interest in trading stock.

        1. An amount that person A receives from the disposal of the trading stock is taken into account in determining their income for the income year. The amount is derived at the time of disposal referred to in subsection (1).

        2. In the calculation of the taxable income of person B for the income year or a later income year, person B is treated as acquiring the trading stock for the amount of the disposal referred to in subsection (2).

        3. In this section, a disposal—

        4. includes the passing of property by an exchange, gift, distribution under a will or on intestacy; and
          1. does not include a disposal under any of sections FC 3 to FC 8 (which relate to distributions after death) that is not at market value.

            1. This section overrides section CB 1.

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