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Income Tax Act 2007

Recharacterisation of certain transactions - Terminating provisions

FZ 6: Transitional valuation rule for estate property

You could also call this:

“Special valuation rules for inherited property before October 2005”

This law applies when someone dies or when their estate is being distributed. It covers property that is handed over in these situations, but only if the death or distribution happened before 1 October 2005. For this law to apply, all the people who inherit from the deceased person must live in New Zealand in the tax year when the property is passed on. Also, none of the money they inherit can be exempt from tax because it was given to charity.

When figuring out how much the property is worth for tax purposes, you need to value it as if it was transferred right before the person died or on the day it was distributed. You can use the market value, which is how much it would sell for. Or you can use a special value for property that was transferred between partners in a relationship. There’s also a third way to value it, which is explained in another part of the law.

Whatever value you choose using these rules is treated as the correct value when you’re doing tax returns for the person who died, the people inheriting, and the estate.

But there’s an exception: if any other part of this law, or the tax laws from 2004 or 1994, say you must use the market value for a certain type of property, then you have to use that market value in the tax return instead.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1516860.

Topics:
Money and consumer rights > Taxes
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Part F Recharacterisation of certain transactions
Terminating provisions

FZ 6Transitional valuation rule for estate property

  1. This section applies to property transferred under section FC 1(1)(a) (Disposals to which this subpart applies) either on a person’s death or on a distribution by an executor, administrator, or trustee of an estate, if—

  2. the death or distribution occurred before 1 October 2005; and
    1. in the tax year in which the property passes, all beneficiaries of the deceased person are resident in New Zealand, and no income of a beneficiary is exempt income under section CW 43 (Charitable bequests).

      1. The valuation of the transferred property for tax purposes for the corresponding income year in which the death or distribution occurred is measured as a transfer occurring immediately before the death of the person, or at the date of distribution, as applicable, at—

      2. market value; or
        1. a value under subpart FB (Transfers of relationship property) for property of the type; or
          1. a value under subsection (4).

            1. For the purposes of providing a return of income for the deceased person, beneficiary, and estate, a value determined under subsection (2) is treated as correct.

            2. Despite subsection (3), if this Act, the Income Tax Act 2004, or Income Tax Act 1994, requires the use of a market value for an item of property, that value must be used in the return of income.

            Compare
            Notes
            • Section FZ 6(1): amended, on , by section 118 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).