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CB 25: Disposal of land with standing timber
or “Tax rules for selling land with trees”
You could also call this:

“How portfolio investment entities handle income from selling certain shares and related dividends”

This section talks about what happens when a company called a portfolio investment entity sells certain shares. It applies when the money they get from selling the shares is not counted as income because of another rule. The shares can’t be in a listed PIE, which is a special kind of investment company.

If a dividend is declared on the shares before they are sold, and it’s paid to someone who owns the shares after they’re sold, something special happens. The company that sold the shares has to count some money as income if they give the money from selling the shares to investors who don’t get the dividend.

To figure out how much income the company has to count, they use a special calculation. They look at how many shares they had when the dividend was declared, how many shares actually got the dividend, and how much the dividend was for each share. If the dividend wasn’t fully imputed (which means some tax was already paid on it), they use a different amount in the calculation.

The result of this calculation must be a positive number, which means the company will always have some income to report in this situation.

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Next up: CB 27: Income equalisation schemes

or “Rules for managing income over time using special schemes”
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Part C Income
Income from business or trade-like activities: Exclusion for investment land

CB 26Disposal of certain shares by portfolio investment entities

  1. This section applies when—

  2. the income from the disposal by a person (the entity) of the share is excluded income under section CX 55 (Proceeds from disposal of investment shares); and
    1. the share is not in a listed PIE; and
      1. a dividend from the share is—
        1. declared before the disposal; and
          1. paid to a holder of the share who, after the disposal, becomes entitled to the dividend; and
          2. the entity attributes the proceeds from the disposal to investors who are not entitled to the benefit of the dividend.

            1. The entity is treated as deriving an amount of income calculated using the formula—

              (shares at declaration − shares on distribution) × dividend.

              Where:

              • In the formula,—

              • shares at declaration is the number of shares held by the entity when the dividend is declared:
                1. shares on distribution is the number of shares for which the entity derives a dividend:
                  1. dividend is the amount of the dividend per share or, for a share issued by an ICA company, the amount of the dividend per share that is not fully imputed.

                    1. The result of the formula must be a positive amount.

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                    Notes
                    • Section CB 26: substituted, on (applying for the 2010–11 and later income years), by section 8(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                    • Section CB 26(1)(ab): inserted, on , by section 8(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                    • Section CB 26(1)(b)(ii): amended (with effect on 1 April 2012), on , by section 4 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                    • Section CB 26(1)(c): inserted (with effect on 1 April 2012), on , by section 4 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
                    • Section CB 26 list of defined terms listed PIE: inserted, on , by section 8(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).