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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:

"Land transferred in a relationship settlement with a development plan"

Illustration for Income Tax Act 2007

You need to know how land is treated when it is transferred as part of a settlement of relationship property. This is for the purposes of section CB 13 and Part D. If the person transferring the land had already started a major development or division scheme, the transfer is treated as a disposal. When this happens, the disposal amount is the market value of the land when the scheme started, plus the expenses incurred before the transfer. The person receiving the land is treated as having spent this amount on the land and the scheme. If no scheme had started, the land is treated as being acquired for its total cost to the transferor. If you want to know the tax consequences when the transferee disposes of the land, see section FB 5.

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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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Part FRecharacterisation 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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