Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules - Consideration treated as paid by person

EW 42: Consideration when acquisition for no, or inadequate, consideration

You could also call this:

“How to calculate value when you get something for free or less than it's worth in a financial arrangement”

When you become part of a financial arrangement, you might get something without paying for it or by paying less than what it’s worth. If this happens, the law treats it as if you paid the full value of what you got on the day you got it. This applies even if you didn’t actually pay anything or if you paid less than the market price. The law acts as if you paid the full market price for your part of the financial arrangement.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515335.

Topics:
Money and consumer rights > Taxes
Money and consumer rights > Banking and loans
Previous

EW 41: Consideration when person enters rules: accrued entitlement, or

“How to calculate money owed to you when financial rules start applying”

Next

EW 43: Consideration when debt disposed of at discount to associate of debtor, or

“Special rules for debt sold at a discount to someone connected to the debtor”

Part E Timing and quantifying rules
Financial arrangements rules: Consideration treated as paid by person

EW 42Consideration when acquisition for no, or inadequate, consideration

  1. This section applies when—

  2. a person becomes a party to a financial arrangement; and
    1. the person acquires an entitlement under the arrangement—
      1. not for monetary consideration; or
        1. for a consideration that is less than the market value of the entitlement on the date of the acquisition.

        2. The person is treated as having paid the market value that the entitlement had on the date of the acquisition.

        Compare