Section HB 7 — Income Tax Act 2007: Disposal of depreciable property

HB 7 Disposal of depreciable property 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 an item of depreciable property that is not depreciable intangible property, and the total cost of the item when it was first acquired by the look-through company (whether or not it was at that time a look-through company) is $200,000 or less. Exiting owner: excluded payment (2) The amount of consideration paid or payable to the exiting owner for the depreciable property is excluded income of the exiting owner. Exiting owner: no deduction (3) The exiting owner is denied a deduction in relation to the depreciable property for the income year in which the disposal of the depreciable property 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 depreciable property. Entering owner: stepping in (5) For the purposes of calculating the income tax liability of an entering owner for the part of the income year after the disposal of the depreciable property occurs and later income years (the post-disposal periods ), the entering owner is treated for the post-disposal periods as if they had originally acquired and held the depreciable property, not the exiting owner. Relationship with section HB 4 (6) Section HB 4 overrides this section. Defined in this Act: acquire , amount , deduction , depreciable intangible property , depreciable property , dispose , entering owner , excluded income , income tax liability , income year , look-through company , owner's interests , pay Section HB 7: 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).