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Income Tax Act 2007

Avoidance and non-market transactions - Market value substituted

GC 4: Disposals and acquisitions of FIF attributing interests

You could also call this:

“Rules for buying and selling shares in foreign investment funds”

If you sell your share in a foreign investment fund (FIF), there are some rules you need to know. When you work out how much money you made or lost from your FIF share, you might use different methods like comparing values, guessing rates of return, looking at fair dividends, or just considering the cost. If you sell your share for less than what it’s really worth, the law will treat it as if you sold it for its real value.

The same idea applies when you buy a share in a FIF. If you pay more or less than what the share is really worth, the law will act as if you bought it for its true value. This is important because it affects how you calculate your income or loss from the FIF share after you buy it.

These rules help make sure that people don’t try to avoid paying the right amount of tax by selling or buying FIF shares at prices that don’t match their real value. It’s a way to keep things fair for everyone.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517078.

Topics:
Money and consumer rights > Taxes
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Part G Avoidance and non-market transactions
Market value substituted

GC 4Disposals and acquisitions of FIF attributing interests

  1. Subsection (2) applies if—

  2. a person disposes of an attributing interest in a foreign investment fund (FIF); and
    1. they calculate their FIF income or loss from the interest for the period ending with the disposal using the comparative value method, deemed rate of return method, the fair dividend rate method, or the cost method; and
      1. the consideration, if any, for the disposal is below the market value of the interest at the time.

        1. The person is treated as having disposed of the interest for an amount equal to its market value at the time.

        2. Subsection (4) applies if—

        3. a person acquires an attributing interest in a FIF; and
          1. they calculate their FIF income or loss from the interest for the period after the acquisition using the comparative value method, deemed rate of return method, the fair dividend rate method, or the cost method; and
            1. the consideration, if any, for the acquisition is not equal to the market value of the interest at the time.

              1. The person is treated as having acquired the interest for an amount equal to its market value at the time.

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