Section HC 31 — Income Tax Act 2007: When existing trusts come into tax base

HC 31 When existing trusts come into tax base When this section applies (1) This section applies if, through a change in circumstances, an amount derived by a trustee of a trust on a day in an income year is assessable income when it would not have been assessable income had it been derived before that day. Examples of a change in circumstances are— (a) a non-resident settlor becomes resident in New Zealand, see section HC 30 : (b) a charitable trust loses its charitable status, see section HC 13 . Person able to make choice (2) The choice given in subsections (3) and (4) is to be made by the person who is liable to satisfy the income tax liability of the trustee. Establishing cost of trust property (3) For the purposes of this Act, the cost of premises, plant, equipment, and trading stock of the trust at the date of the change in circumstances is either— (a) the historical cost of the property or trading stock less accumulated depreciation loss, or other value, no higher than market value, that the trustee used at that date for income tax purposes in a country or territory in which the trustee is liable to pay income tax on trustee income; or (b) the value that would be used at that date under this Act, calculated as if the trustee income derived by the trustee had always been assessable income. Consideration for financial arrangements (4) For the purposes of this Act, the consideration for a financial arrangement of the trust at the date of the change in circumstances is either— (a) the market value of the financial arrangement on that date; or (b) the value calculated using the formula— consideration paid to person + expenditure − consideration paid by person − income. Definition of items in formula (5) In the formula,— (a) consideration paid to person is the consideration that is paid to the person before the date: (b) expenditure is the expenditure that would have been incurred under the financial arrangements rules before the date: (c) consideration paid by person is the consideration that is paid by the person before the date: (d) income is the income that would have been derived under the financial arrangements rules before the date. Non-resident passive income (6) For the purposes of subsections (1) and (3)(b), assessable income does not include an amount derived only as non-resident passive income. Defined in this Act: amount , assessable income , business , charitable trust , consideration , depreciation loss , financial arrangement , financial arrangements rules , income , income tax , income tax liability , income year , non-resident , non-resident passive income , pay , resident in New Zealand , settlor , trading stock trustee , trustee income , Compare: 2004 No 35 s HH 5 Section HC 31(1)(a): amended (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 140(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63). Section HC 31(1)(b): amended (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 140(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).