Section EW 39 — Income Tax Act 2007: Consideration affected by unfavourable factors

EW 39 Consideration affected by unfavourable factors When this section applies (1) This section applies when— (a) a person is a party to a financial arrangement; and (b) the person has an accrued entitlement under the arrangement; and (c) the person disposes of the arrangement; and (d) the consideration for the disposal is affected by any of the following factors: (i) a decline in the other party’s creditworthiness between the date on which the arrangement was entered into and the date of the disposal; or (ii) an increase, between the date on which the arrangement was entered into and the date of the disposal, in the possibility that the other party will not meet an obligation under the arrangement; or (iii) the occurrence of an event reducing or cancelling the other party’s obligations under the arrangement. Exclusion (2) This section does not apply when— (a) the person’s business includes holding or dealing in financial arrangements of the class disposed of; and (b) the parties to the arrangement disposed of are not associated persons. Consideration is market value (3) The person is treated as having been paid the market value that the accrued entitlement had on the date of the disposal, as if the consideration had not been affected by a factor described in subsection (1)(d). Defined in this Act: accrued entitlement , associated person , business , consideration , financial arrangement , pay , Compare: 2004 No 35 s EW 40