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

HG 6 Disposal of trading stock When this section applies (1) This section applies when a person (the exiting partner ) disposes of some or all of their partner’s interests in a partnership, 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 partnership, ignoring section HG 2 , is $3,000,000 or less. Exiting partner: excluded payment (2) The amount of consideration paid or payable to the exiting partner for the trading stock is excluded income of the exiting partner. Exiting partner: no deduction (3) The exiting partner is denied any 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 partner is allowed a deduction because of subsection (5). Entering partner: no deduction (4) The entering partner is denied any deduction for the amount of consideration paid or payable to the exiting partner for the trading stock. Entering partner: stepping in (5) For the purposes of calculating the income tax liability of an entering partner, the entering partner is treated as if they had acquired and held the trading stock, not the exiting partner. Exclusion by election (6) This section does not apply for the partners of a small partnership if section HG 3(2) applies. Relationship with section HG 4 (7) Section HG 4 overrides this section. Defined in this Act: deduction , dispose , entering partner , excluded income , income tax liability , partner , partner’s interests , partnership , small partnership , trading stock , turnover Section HG 6: inserted, on 1 April 2008, by section 19(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2). Section HG 6(6): amended (with effect on 1 April 2008), on 6 October 2009, by section 272(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).