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New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Transfers of relationship property

FB 4: Land under scheme for major development or division

You could also call this:

“Tax rules for transferring land in development as part of relationship property”

This law applies when you transfer land as part of a relationship property settlement. It’s about how to handle the tax situation if the land is part of a big development or division project.

If you’ve already started a major development or division project on the land before you transfer it, the transfer is treated as if you sold the land. The amount you’re considered to have sold it for is the land’s market value when you started the project, plus any money you spent on the project before the transfer.

The person who gets the land is treated as if they bought it for the same amount. They’re also considered to have spent the same amount on the project as you did.

If you haven’t started any major development or division project when you transfer the land, the person who gets it is treated as if they bought it for whatever it cost you up to that point.

If the person who gets the land later sells it, you need to look at section FB 5 to understand the tax effects.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516335.

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FB 3: Land acquired for certain purposes or under certain conditions, or

“Land transferred in relationship property settlements”

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FB 5: Disposal of land, or

“Rules for giving away or losing land to someone who isn't family or a close friend”

Part F Recharacterisation of certain transactions
Transfers of relationship property

FB 4Land under scheme for major development or division

  1. This section applies for the purposes of section CB 13 (Disposal: amount from major development or division and not already in income) and Part D (Deductions) when land is transferred on a settlement of relationship property.

  2. If the transferor has already begun an undertaking or scheme of the kind referred to in section CB 13, the transfer is treated as a disposal by them for an amount that equals the sum of—

  3. the market value of the land on the date on which they began the undertaking or scheme:
    1. the expenditure that they have incurred in carrying on the undertaking or scheme before the date of transfer.

      1. For the purposes of subsection (2), the transferee is treated as having incurred expenditure in—

      2. acquiring the land of an amount equal to the market value referred to in subsection (2)(a); and
        1. carrying on the undertaking or scheme of an amount equal to the expenditure in subsection (2)(b).

          1. If no undertaking or scheme as described in subsection (2) has begun at the date of transfer, the transferee is treated as having acquired the land for an amount that equals the total cost of the land to the transferor at the date of transfer.

          2. For the tax consequences if the transferee disposes of the land, see section FB 5.

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