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Income Tax Act 2007

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

FC 4: Property transferred to charities or to close relatives and others

You could also call this:

“Rules for property left to family or tax-exempt groups after someone dies”

This section talks about what happens to certain property when someone dies. It applies when the property is given to specific people or groups.

For this section to apply, a few things need to be true:

All the people who get the property (called beneficiaries) must be either close relatives of the person who died or groups that don’t have to pay tax (like charities).

The property can’t be given to someone for just their lifetime.

There can’t be any special arrangements (called trusts) set up for the property, except for the normal things needed to carry out the person’s will and look after their estate.

Any money earned from the property must be given out as allowed by the person’s will or the rules that apply when someone dies without a will. The person looking after the estate (called a trustee) must follow their legal duties when giving out this money.

If all these things are true, then the law treats giving away this property the same way it treats property that’s divided when a relationship ends. You can find more information about that in subpart FB.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516385.

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

FC 4Property transferred to charities or to close relatives and others

  1. This section applies in the circumstances described in section FC 1(1)(b) when tax-base property is transferred on a person’s death if—

  2. each beneficiary of the deceased person is described in subsection (2); and
    1. no life interest in the property is created; and
      1. no trust over the property is created, other than a trust to execute the will and administer the estate; and
        1. the net income of the estate is distributed as described in subsection (3).

          1. A beneficiary of the deceased person must be—

          2. a close relative of the deceased person:
            1. a person exempt under section CW 41, CW 42, or CW 43 (which relate to exempt income of charities).

              1. While the administration of the estate is continuing, the net income of the estate is distributed to the extent allowed—

              2. under the will or the rules governing intestacy; and
                1. by the trustee’s legal obligations.

                  1. The transfer is treated as a transfer of property on a settlement of relationship property under subpart FB (Transfers of relationship property).

                  Notes
                  • Section FC 4: replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 167(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                  • Section FC 4(1): amended (with effect on 6 October 2009), on , by section 168(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                  • Section FC 4(4): amended (with effect on 6 October 2009), on , by section 168(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).