Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 26: Amount from profit-making undertaking or scheme and not already in income

You could also call this:

“Claiming deductions for profits from activities not covered by other tax rules”

This law applies when you make money from a profit-making activity that isn’t covered by other parts of the tax law. If this happens, you can claim a deduction for the value of the property involved in the activity.

To figure out how much you can deduct, you need to pretend two things happened. First, imagine you sold the property to someone you don’t know just before you started the profit-making activity. Then, imagine you bought it back right after you started the activity, paying whatever it was worth at that time.

This law adds to the general permission for deductions, but you still need to follow the general limits on deductions. If you want to know more about the general permission or general limitations, you can look at other parts of the tax law.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513635.

Topics:
Money and consumer rights > Taxes
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DB 25: Cancellation of shares held as revenue account property, or

“Tax rules for cancelled company shares you hold for trading”

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DB 27: Amount from major development or division and not already in income, or

“Tax deduction for land value in major development projects not counted as income elsewhere”

Part D Deductions
Specific rules for expenditure types

DB 26Amount from profit-making undertaking or scheme and not already in income

  1. This section applies when a person derives income under section CB 3 (Profit-making undertaking or scheme) that is not their income under any other provision of this Act.

  2. The person is allowed a deduction for the value of the property, as determined under subsection (3).

  3. For the purpose of determining the amount of the deduction, the person is treated as—

  4. having disposed of the property to an unrelated third party immediately before the start of the undertaking or scheme; and
    1. having reacquired the property immediately after the start of the undertaking or scheme at the market value of the property at the time.

      1. This section supplements the general permission. The general limitations still apply.

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