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Income Tax Act 2007

Recharacterisation of certain transactions - Distribution, transmission, and gifts of property

FC 9: Residential land transferred to executor, administrator, or beneficiary on death of person

You could also call this:

“Rules for residential land transfers after someone dies”

When someone dies and their residential land is transferred, there are special rules about how it’s treated for tax purposes. These rules apply in certain situations described in other parts of the law.

If residential land is transferred because someone has died, you don’t have to worry about the bright-line test. This test usually applies when you sell a house within two years, but it doesn’t count for these transfers. This includes when the land goes to the person who’s sorting out the deceased person’s affairs.

If you receive the land and then sell it, the cost of the land for tax purposes is what the person who died paid for it. You can also include any other costs that the deceased person, their estate manager, or you spent on the land that haven’t been claimed as tax deductions before.

There’s a special case if you’re a beneficiary (someone who inherits from the deceased person) and you give the land to someone else as described in another part of the law. If that person then sells the land, they don’t have to worry about the bright-line test either.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM6663140.

Topics:
Money and consumer rights > Taxes
Housing and property > Buying and selling homes
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“Rules for transferring financial arrangements after death”

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FC 9B: Residential land: certain transferors, or

“Rules for some people transferring residential land, ending 1 July 2024”

Part F Recharacterisation of certain transactions
Distribution, transmission, and gifts of property

FC 9Residential land transferred to executor, administrator, or beneficiary on death of person

  1. This section applies in the circumstances described in section FC 1(1)(a) or (b) when residential land is transferred on a person’s death and section FC 5 does not apply.

  2. Section CB 6A (Disposal within 2 years: bright-line test for residential land) does not apply to the transfer of residential land, including any intervening transfer to an executor or administrator (see also: section CB 6A(5)(b)).

  3. If the residential land is transferred to a person who disposes of it, and the person derives income, the cost of the land to the person is—

  4. the cost of the land incurred by the deceased person; and
    1. all other expenditure incurred by the person, the deceased person, or the administrator or executor of the deceased person, as applicable, for which no deduction has been allowed.

      1. Despite subsection (3), if the residential land is transferred by a beneficiary of the deceased person to a person who is a recipient as described in subpart FD, and the person disposes of it, section CB 6A does not apply to the disposal.

      Notes
      • Section FC 9: inserted (with effect on 1 October 2015 and applying to a person’s disposal of residential land if the date that the person first acquires an estate or interest in the residential land is on or after that date), on , by section 15(1) of the Taxation (Bright-line Test for Residential Land) Act 2015 (2015 No 111).
      • Section FC 9(2): replaced, on , by section 127 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
      • Section FC 9(4) heading: inserted (with effect on 27 March 2021), on , by section 66(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
      • Section FC 9(4): inserted (with effect on 27 March 2021), on , by section 66(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
      • Section FC 9(4): amended, on , by section 127 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).