Section HB 6 — Income Tax Act 2007: Disposal of trading stock

HB 6 Disposal of trading stock When this section applies (1) This section applies when a person (the exiting owner ) disposes of some or all of their owner’s interests for a look-through company, to the extent to which those interests include trading stock that is not livestock, and, for the income year of disposal, the total turnover of the look-through company, ignoring section HB 1 , is $3,000,000 or less. Exiting owner: excluded payment (2) The amount of consideration paid or payable to the exiting owner for the trading stock is excluded income of the exiting owner. Exiting owner: no deduction (3) The exiting owner is denied a deduction in relation to the trading stock for the income year in which the disposal of the trading stock occurs and later income years, to the extent to which the entering owner is allowed a deduction because of subsection (5). Entering owner: no deduction (4) The entering owner is denied a deduction for the amount of consideration paid or payable to the exiting owner for the trading stock. Entering owner: stepping in (5) For the purposes of calculating the income tax liability of an entering owner, the entering owner is treated as if they had acquired and held the trading stock, not the exiting owner. Relationship with section HB 4 (6) Section HB 4 overrides this section. Defined in this Act: deduction , dispose , entering owner , excluded income , income tax liability , income year , look-through company , owner's interests , pay , trading stock , turnover Section HB 6: inserted, on 1 April 2011 (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).