Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Recharacterisation of certain transactions - Amalgamation of companies

FO 6: Cancellation of shares

You could also call this:

“How shares are treated when companies merge and cancel existing shares”

When two companies join together, it’s called an amalgamation. If one company (let’s call it Company A) owns shares in the other company (Company B), and those shares are cancelled when they join, something special happens. You treat it as if Company A sold its shares in Company B just before they joined. The amount of money Company A gets for these shares is the same as what Company A paid for them in the first place. This helps keep track of the money and shares when companies join together.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516790.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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FO 5: Amalgamations and remitted liabilities, or

“How tax rules apply when companies merge and have unpaid debts”

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FO 7: Income derived after amalgamation, or

“Income received after companies combine is treated as if the original company still existed”

Part F Recharacterisation of certain transactions
Amalgamation of companies

FO 6Cancellation of shares

  1. If an amalgamating company (company A) holds shares in another amalgamating company (company B), and the shares are cancelled on the amalgamation, company A is treated as having disposed of the shares in company B immediately before the amalgamation for an amount equal to the cost of the shares to company A.

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