Section EB 5 — Income Tax Act 2007: Transfers of trading stock within wholly-owned groups

EB 5 Transfers of trading stock within wholly-owned groups When this section applies (1) This section applies in an income year to trading stock held by a company that is part of a wholly-owned group of companies, when— (a) a group company ( company A ) originally acquires and holds the trading stock; and (b) from the time it is acquired to the end of the income year, the trading stock is held within the group by a company or companies that are resident in New Zealand; and (c) through transfers within the group, another group company ( company B ) holds the trading stock at the end of the income year; and (d) company A and company B remain part of the group at the end of the income year; and (e) either— (i) the income years of company A and company B end on the same date; or (ii) they end on different dates, and the Commissioner has approved both dates as corresponding to the end of a business cycle and as necessary to avoid material distortion of net income that would occur if the income years ended on the same date. Choice of treatment (2) Company B may choose to value the closing stock at the cost of the trading stock to company A. When company stops being part of group (3) If the companies stop being part of the same wholly-owned group, company B is treated as disposing of and reacquiring the trading stock for its market value at the time. If the market value of the trading stock cannot be determined separately from other property, its market value at the time company B acquired it is treated as its value. Defined in this Act: business , closing stock , Commissioner , company , cost , income year , market value , net income , resident in New Zealand , trading stock , wholly-owned group of companies , Compare: 2004 No 35 s EB 5