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Income Tax Act 2007

Deductions - Forestry expenditure

DP 10: Cost of acquiring timber or right to take timber: other cases

You could also call this:

“How to calculate the cost when buying timber or rights to timber in various situations”

When you buy land with trees on it, and the person selling the land has to pay income tax on the sale of those trees, the cost of buying the trees is the same as the amount of income tax the seller has to pay.

If you get timber or the right to take timber in certain situations, like through a relationship agreement or when someone sells their business stock, the cost for you is based on specific rules. These rules look at things like the agreed price in a relationship settlement or the market value of the timber.

There are special rules when you get timber, the right to take timber, or standing trees from someone you’re connected to (like a family member or business partner). If the person giving you the timber has to pay income tax on it, there are limits on how much they can claim as a cost. They can’t claim more than the amount of income tax they have to pay.

If you’re the one getting the timber in this situation, the cost for you includes what you paid plus any amount the other person couldn’t claim as a cost. This means you might end up with a higher cost than what you actually paid.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513997.

Topics:
Money and consumer rights > Taxes
Housing and property > Land use
Business > Industry rules
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DP 11: Cost of timber, or

“How to claim a tax deduction for timber costs when selling timber”

Part D Deductions
Forestry expenditure

DP 10Cost of acquiring timber or right to take timber: other cases

  1. For a person acquiring land with standing timber on it in a disposal to which section CB 25 (Disposal of land with standing timber) applies, the cost of acquiring the timber is the amount that is, under section CB 25, income of the person disposing of the land.

  2. For a person acquiring timber or a right to take timber in a disposal or distribution to which section FB 6, FB 7, GC 1, or GC 2 (which relate to the disposal of trading stock) applies, the cost of acquiring the timber or the cost of acquiring a right to take timber is the amount treated as—

    1. the consideration under sections FB 6 and FB 7 (which relate to the disposal of timber under a relationship agreement); or
      1. the price realised under section GC 1 (Certain disposals of trading stock at below market value); or
        1. the price realised under section GC 2 (Disposals of timber rights or standing timber).

          1. Subsections (4) and (5) apply if—

          2. a person (the transferor) disposes of timber, a right to take timber, or standing timber, to an associated person (the transferee); and
            1. as a result, the transferor has an amount of income under section CB 24 or CB 25 (which relate to income from timber).

              1. The deduction that the transferor is allowed for the cost of the timber, right to take timber, or standing timber must not be more than the amount of the income.

              2. The deduction that the transferee is allowed for the cost of acquiring the timber is calculated on the basis that the transferee acquired the timber for the total of—

              3. the cost to the transferee of acquiring the timber; and
                1. the amount, if any, for which the transferor is denied a deduction under subsection (4).

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                  Notes
                  • Section DP 10(2): amended, on , by section 50(1) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                  • Section DP 10(2)(a): repealed, on , by section 50(2) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                  • Section DP 10(2)(c): amended, on , by section 50(3) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                  • Section DP 10(5): amended (with effect on 1 April 2008), on , by section 14(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                  • Section DP 10 list of defined terms pay: repealed, on , by section 50(4) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).