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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules - Consideration when legal defeasance has occurred

EW 47: Legal defeasance

You could also call this:

“Calculating payments when someone else takes over financial obligations”

When someone has a legal defeasance on a financial arrangement, it means another person has to take over the remaining obligations. If you have the right to receive money from this arrangement, you need to calculate a base price adjustment as required by [section EW 29].

The money you receive as part of this arrangement comes from two sources. You get some money from the original person who owed it (the debtor), and you also get money from the new person who has taken over the remaining obligations. When you add these two amounts together, that’s the total amount of money you’ve received for this financial arrangement.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515351.

Topics:
Money and consumer rights > Taxes
Money and consumer rights > Banking and loans
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“How insolvent companies repay debt by issuing shares”

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EW 47B: Cessation of LTCs and dissolution of partnerships, or

“Rules for calculating tax when a business partnership ends or a look-through company stops operating”

Part E Timing and quantifying rules
Financial arrangements rules: Consideration when legal defeasance has occurred

EW 47Legal defeasance

  1. This section applies when—

  2. the obligations of a financial arrangement were the subject of a legal defeasance that required another person to meet the remaining obligations of the arrangement; and
    1. the person who has a right to receive money under the arrangement is now required by section EW 29 to calculate a base price adjustment for it.

      1. The consideration received by the person who has a right to receive money under the arrangement is the total of—

      2. the amounts received from the original debtor; and
        1. the amounts received from the person required to meet the remaining obligations.

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