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Income Tax Act 2007

Taxation of certain entities - Look-through companies

HB 2: Previous income and expenditure or loss

You could also call this:

“Income, expenses, or losses from previous years may still affect your tax”

If you have an effective look-through interest in a look-through company (LTC), you might be treated as if you earned income or had expenses or losses that the LTC actually earned or had. This can happen even if you don’t have an interest in the LTC at the time the income was earned or the expense or loss happened. It’s important to know that this rule doesn’t let you claim the same expense or loss twice. This rule can also apply to income that was earned before the company became an LTC.

The law treats the situation as if section HB 1 didn’t exist. This means the LTC is seen as a regular company, not a look-through company, for this purpose. Even if the LTC has stopped existing, you might still be treated as if you had this income, expense, or loss.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3676674.

Topics:
Money and consumer rights > Taxes
Previous

HB 1: Look-through companies are transparent, or

“Look-through companies are treated as if they don't exist for tax purposes”

Next

HB 3: Loss balances extinguished, or

“Companies lose previous tax losses when becoming look-through companies”

Part H Taxation of certain entities
Look-through companies

HB 2Previous income and expenditure or loss

  1. Despite a person who has an effective look-through interest for a look-through company (the LTC) not having an interest at the relevant time, the person may be treated as deriving income or incurring an expenditure or loss which the LTC derived or incurred ignoring section HB 1, or would have derived or incurred ignoring section HB 1 if it had not ceased to exist. This section does not allow 2 deductions for 1 expenditure or loss, and may apply to income derived before the LTC becomes a look-through company.

Notes
  • Section HB 2: inserted, on (applying for income years beginning on or after 1 April 2011, and for the purposes of the Commissioner receiving LTC elections, on and after 21 December 2010), by section 78(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).