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Income Tax Act 2007

Taxation of certain entities - Terminating provisions

HZ 4: Overseas limited partnerships: transition into limited partnerships deduction rules

You could also call this:

“Rules for tax deductions when overseas partnerships become limited partnerships”

You need to know about a rule for overseas limited partnerships that existed before 1 April 2008. If you’re a partner in one of these partnerships on 1 April 2008, and you’re affected by certain rules about limited partnerships, this applies to you.

When you’re figuring out how much you can deduct for tax purposes, you and the other partners need to choose one of two ways to calculate your ‘partner’s basis’:

  1. You can use the market value or the accounting book value of certain amounts. You’ll do this on the last day of the first tax year when the new rules apply to you.

  2. Or, you can pretend that your overseas partnership has always been a limited partnership, and that all the rules about limited partnerships have always existed. You’ll need to make some adjustments to make this work.

If using these methods gives you a negative number for your partner’s basis, you should treat it as zero instead.

Remember, when we talk about sections HG 11 and HG 12, we’re referring to the rules about deductions for limited partnerships.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1693998.

Topics:
Money and consumer rights > Taxes
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“Rules for special partnerships becoming limited partnerships”

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HZ 4B: Qualifying companies: transition into partnership, or

“How qualifying companies can become partnerships for tax purposes”

Part H Taxation of certain entities
Terminating provisions

HZ 4Overseas limited partnerships: transition into limited partnerships deduction rules

  1. This section applies when a limited partnership described in paragraphs (a) and (b) of the definition of limited partnership (the overseas limited partnership) existed before 1 April 2008, and a partner of that partnership (a relevant partner) is a member of the partnership on 1 April 2008 and is subject to sections HG 11 and HG 12 (which relate to limited partnerships deduction rules) on or after 1 April 2008.

  2. For the purposes of applying sections HG 11 and HG 12 to the relevant partners of the overseas limited partnership, all relevant partners must choose one of the 2 following methods for calculating their partner’s basis under section HG 11:

  3. they may choose to use the market value or the accounting book value of the amounts described in section HG 11, as at the day the calculation is first performed, namely the last day of the first income year in which they are subject to sections HG 11 and HG 12; or
    1. they may choose to apply section HG 11 as if the overseas limited partnership had always been a limited partnership and all relevant rules relating to limited partnerships had always existed (applying those rules with any necessary modifications).

      1. If the application of sections HG 11 and HG 12, as modified by this section, calculates a partner’s basis as less than zero, then the partner’s basis is treated as being zero.

      Notes
      • Section HZ 4: added, on , by section 21(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).