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Income Tax Act 2007

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

FC 2: Transfer at market value

You could also call this:

"Selling property at its market value when you give it to someone else"

Illustration for Income Tax Act 2007

When you transfer property in certain situations, it is treated as if you sold it at its market value. The transfer is considered to happen on the date of the transaction. You can find more information about these situations in section FC 1(1). If the property is transferred because someone has died, the transfer is treated as happening just before the person died. This is for property referred to in section FC 1(1)‎(a). Some other sections of the law, such as ED 2B, FC 3 to FC 6, and FC 10, override this rule. There are some exceptions to this rule, such as when the transfer is a settlement on a trust or a distribution from a trust, as defined in section HC 14.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516380.

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Topics:
Money and consumer rights > TaxesHousing and property > Buying and selling homes
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FC 1: Disposals to which this subpart applies, or

"When you get rid of property, like giving it away or inheriting it"

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

"What happens to property when someone dies and it's transferred to their partner"

Part FRecharacterisation 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 6 and FC 10 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 (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 99(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • 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).