Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Distribution, transmission, and gifts of property

FC 1: Disposals to which this subpart applies

You could also call this:

"When you get rid of property, like giving it away or selling it, this law applies"

Illustration for Income Tax Act 2007

This part of the law applies to you when you get rid of property in certain ways. You might get rid of property when someone dies and their estate is transferred to an executor. This can also happen when property is transferred to a beneficiary of a trust. You can get rid of property in other ways too, like when a company distributes property to a shareholder. This can happen when a company is transferring value because of a shareholding, as described in section CD 6. You can also get rid of property when you make a gift, but not if the gift is trading stock. There are some special words used in this law that you need to know. A "close relative" is a person who is related to the deceased, like a spouse or partner. "Property" includes things like a look-through interest in a company. "Tax-base property" is property that is used to work out tax, like a financial arrangement or an item that can be depreciated. When a trust settles property on another trust, it must be authorised by a trust instrument or section 64 of the Trusts Act 2019. This law applies to you in these situations, and it helps to work out the value of the property that is being got rid of.

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 It might be out of date or be missing some parts.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=DLM1516374.

This page was last updated on — View changes

Topics:
Money and consumer rights > TaxesHousing and property > Buying and selling homesHousing and property > Land useBusiness > Industry rules
Previous

FB 21: Depreciable property, or

"What happens to items that lose value over time, like cars or buildings, when you buy or sell them"

Next

FC 2: Transfer at market value, or

"Transferring property is like selling it at its market value on the transaction date."

Part FRecharacterisation of certain transactions
Distribution, transmission, and gifts of property

FC 1Disposals to which this subpart applies

  1. This subpart provides a value for property that is disposed of under the transactions referred to in section FC 10 and under transactions that are—

  2. the transfer of a person’s estate to an executor or administrator on the death of the person:
    1. the transfer of property on a distribution by an executor, administrator, or trustee of a deceased person’s estate to a beneficiary who is beneficially entitled to receive the property under the will or the rules governing intestacy:
      1. the transfer of property on a distribution by a trustee of a trust to a beneficiary of the trust, unless the distribution is part of an arrangement under which the beneficiary pays an amount for the property that would reasonably be expected to be paid on a disposal at arm’s length:
        1. the transfer of property on a distribution in kind by a company in a transfer of company value caused by a shareholding in the company under section CD 6 (When is a transfer caused by a shareholding relationship?):
          1. the transfer of property on the making of a gift, other than a gift of trading stock or an interest in trading stock:
            1. the transfer of property on a settlement by the trustee of a trust on the trustee of another trust, if authorised under—
              1. a trust instrument as a power of advancement or resettlement:
                1. section 64 of the Trusts Act 2019 as the payment or application of capital money or other capital assets.

                2. In this subpart,—

                  close relative, in relation to a transfer from a person’s estate, means—

                  1. a surviving spouse, civil union partner, or de facto partner of the deceased person:
                    1. a person who is within the second degree of relationship to the deceased person

                      property includes a look-through interest for a look-through company

                        tax-base property means—

                        1. revenue account property:
                          1. an attributing interest in a foreign investment fund (FIF):
                            1. a financial arrangement other than an arrangement for which the deceased person, or their trustee, was a cash basis person:
                              1. an item for which a deduction for an amount of depreciation loss arises.

                              Compare
                              Notes
                              • Section FC 1 heading: replaced (with effect on 1 April 2008), on , by section 166(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                              • Section FC 1(1): amended, on , by section 98 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                              • Section FC 1(1)(c): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 166(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                              • Section FC 1(1)(d): amended, on , by section 116(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                              • Section FC 1(1)(e): amended, on , by section 74(1) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                              • Section FC 1(1)(f)(ii): replaced, on , by section 161 of the Trusts Act 2019 (2019 No 38).
                              • Section FC 1(2) property: inserted, on (applying for income years beginning on or after 1 April 2011), by section 63(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                              • Section FC 1 list of defined terms look-through company: inserted, on , by section 63(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                              • Section FC 1 list of defined terms look-through interest: inserted, on , by section 63(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                              • Section FC 1 list of defined terms property: inserted (with effect on 1 April 2008), on , by section 166(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                              • Section FC 1 list of defined terms trading stock: inserted, on , by section 74(2) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                              • Section FC 1 list of defined terms transfer of company value: inserted, on , by section 116(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                              • Section FC 1 list of defined terms transfer of value: repealed, on , by section 116(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).