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FC 1: Disposals to which this subpart applies
or “When this part of the law applies to property transfers”
You could also call this:

“Property transfers are treated as sales at market value, with some exceptions”

When someone transfers property in certain situations, it’s treated as if they sold it and the other person bought it at its market value. This is considered to happen on the day of the transfer.

If the property transfer happens because someone died, it’s treated as if it occurred just before they passed away.

There are some special rules in other parts of the law that can change how this works. These rules are more important than the one we just talked about.

This rule about market value doesn’t apply when deciding if something is a gift to a trust or if it’s money or property given out by a trust.

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Next up: FC 3: Property transferred to spouse, civil union partner, or de facto partner

or “Property given to partners after someone dies”
Next

Part F Recharacterisation of certain transactions
Distribution, transmission, and gifts of property

FC 2Transfer at market value

  1. The transfer of property in circumstances described in section FC 1(1) is treated as a disposal by the transferor and an acquisition by the transferee at the market value of the item for the transferor. The disposal is treated as occurring on the date of the transaction.

  2. For property referred to in section FC 1(1)(a), the disposal and acquisition is treated as occurring immediately before the death of the person.

  3. Sections ED 2B (Transfers to shareholders by ASX-listed Australian company of shares in subsidiary) and FC 3 to FC 9, FC 10, FD 1, and FD 2 override this section.

  4. Subsection (1) does not apply for the purposes of determining whether a transfer of property is—

  5. a settlement on a trust:
    1. a distribution from a trust as defined in section HC 14 (Distributions from trusts).

      Compare
      Notes
      • Section FC 2(1): amended, on , by section 99(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section FC 2(2): substituted (with effect on 1 April 2008), on , by section 204 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section FC 2(3): amended, on , by section 127 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
      • Section FC 2(3): amended, on (with effect on 1 April 2016), by section 94 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section FC 2(3): amended, on , by section 67 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
      • Section FC 2(4) heading: replaced (with effect on 18 March 2019), on , by section 117(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section FC 2(4): replaced (with effect on 18 March 2019), on , by section 117(1) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section FC 2 list of defined terms distribution: inserted, on , by section 192(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
      • Section FC 2 list of defined terms property: inserted, on , by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
      • Section FC 2 list of defined terms settlement: inserted (with effect on 18 March 2019), on , by section 117(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).