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Income Tax Act 2007

Recharacterisation of certain transactions - Consolidated groups of companies - Accounting for particular property

FM 17: Trading stock

You could also call this:

“Rules for transferring and valuing stock between companies in the same group”

You can transfer trading stock between companies in the same consolidated group. This applies when one company gives identifiable trading stock to another company in the same group. Both companies need to agree on how to value the stock. They can choose to value it using the rules in subpart EB or at the cost to the company giving the stock.

The main company of the group needs to tell the Commissioner about this transfer. They should do this when they file the group’s tax return, or later if the Commissioner agrees.

If the company giving the stock had it at the start of the tax year, the value of the transfer is what the stock was worth at the start of the year. This value is worked out using the rules in subpart EB.

If the company didn’t have the stock at the start of the year, the value of the transfer is what the company paid for the stock.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516665.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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Part F Recharacterisation of certain transactions
Consolidated groups of companies: Accounting for particular property

FM 17Trading stock

  1. This section applies in an income year in which a company (company A) transfers identifiable trading stock to another company (company B) when—

  2. company A and company B are in the same consolidated group at the time of the transfer; and
    1. company A and company B choose to value the trading stock under subpart EB (Valuation of trading stock (including dealer’s livestock)) or at the cost to company A, as applicable; and
      1. the nominated company of the consolidated group notifies the Commissioner within the time for providing the consolidated group’s return of income, or a later time if the Commissioner agrees.

        1. If company A held the trading stock at the start of the income year, the consideration for the transfer is the value of the trading stock at the start of the income year determined under subpart EB.

        2. If subsection (2) does not apply, the consideration for the transfer is the cost of the trading stock to company A.

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