Section EE 40 — Income Tax Act 2007: Transfer of depreciable property on or after 24 September 1997

EE 40 Transfer of depreciable property on or after 24 September 1997 When this section applies (1) This section applies when, on or after 24 September 1997, a person ( person A ) acquires, directly or indirectly, an item of property from an associated person to whom any of subsections (2) to (6) applies. The income year referred to is the income year of the associated person. Deduction for depreciation loss allowed in year of acquisition (2) The associated person is allowed a deduction for an amount of depreciation loss for the item for the income year in which person A acquires it, or would have been allowed the deduction if section EE 11(1) had not applied. Deduction for depreciation loss allowed in year before acquisition (3) The associated person was allowed a deduction for an amount of depreciation loss for the income year before that in which person A acquired it. When section DZ 9 applies (4) The associated person has been allowed a deduction for the item under section DZ 9 (Premium paid on land leased before 1 April 1993)— (a) for the income year in which person A acquired it; or (b) for the income year before that in which person A acquired it; or (c) would have been allowed a deduction in either income year if they had incurred a cost for the item for which they were denied any other deduction. If costs incurred for which deduction denied (5) The associated person would have been allowed a deduction for an amount of depreciation loss for the item— (a) for the income year in which person A acquired it, if they had incurred a cost for the item for which they were denied any other deduction and if section EE 11(1) had not applied; or (b) for the income year before that in which person A acquired it, if they had incurred a cost for the item for which they were denied any other deduction. When section EE 8 applies (6) The associated person would have been a person to whom any of subsections (2) to (5) applied, if they had not made an election under section EE 8 . Cost of item to person A (7) For the purposes of determining the amount of depreciation loss that person A has, the cost of the item to person A is treated as 1 of the following: (a) if section EE 58 applies to set a base value for the item, the lesser of— (i) the cost of the item to person A: (ii) the item’s market value when the associated person starts to use it, or to have it available for use, for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; or (b) if section EE 58 does not apply, the lesser of— (i) the cost of the item to person A: (ii) the cost of the item to the associated person. Exclusions (8) Subsection (7) does not apply if— (a) the item is not depreciable intangible property, and the Commissioner decides that it is appropriate to use the cost of the item to person A for the purposes of determining the amount of depreciation loss that person A has for the item: (b) the cost to person A is income of the associated person, other than under section EE 48(1) : (c) person A acquires the item on a settlement of relationship property to which section FB 21 (Depreciable property) applies. Rate (9) The annual rate that person A applies to the item must be 1 of the following: (a) when person A uses the same depreciation method for the item as that used by the associated person for it, the annual rate must be no more than the annual rate that the associated person applied to it: (b) when person A uses a depreciation method for the item that is different from the method the associated person used for it, the annual rate must be no more than a rate equivalent to the rate that the associated person applied to it, as determined by schedule 10 (Straight-line equivalents of diminishing value rates of depreciation). Fixed life intangible property (10) Subsection (6) does not apply to an item of fixed life intangible property whose rate is set in section EE 33 . Relationship with section EE 41 and subpart FC (11) This section— (a) is overridden by section EE 41 : (b) does not apply to a bequest of property when subpart FC (Distribution, transmission, and gifts of property) applies to it and the property is disposed of at market value. Defined in this Act: acquire , amount , annual rate , assessable income , associated person , business , Commissioner , deduction , depreciable intangible property , depreciation loss , depreciation method , fixed life intangible property , income , income year , property , settlement of relationship property , Compare: 2004 No 35 s EE 33