Section IC 12 — Income Tax Act 2007: Bad debts or decline in value of shares

IC 12 Bad debts or decline in value of shares When this section applies (1) This section applies to companies that are part of a group of companies in a tax year when— (a) a company ( company C ) in the group has in the tax year a deduction— (i) under section DB 31 (Bad debts) for a loan to another company in the group: (ii) for a decline in the value of shares in another company in the group; and (b) a company ( company A ) in the group, other than company C, has a tax loss for the tax year that includes a tax loss component arising from a deduction— (i) for expenditure funded by the loan referred to in paragraph (a)(i) or by the issue to company A of the shares referred to in paragraph (a)(ii); and (ii) taken into account in calculating company A's tax loss for the 1993–94 tax year or a later tax year. Limitation on loss grouping (2) The amount of company A's tax loss cannot be made available to another company in the group to use except to the extent to which the amount of the tax loss is more than the total amount of the deductions referred to in subsection (1)(a). To that extent, company A may choose to make the excess amount available to a group company to use under section IA 3(2) and IA 5 (which relate to using and carrying forward tax losses) if the requirements for grouping tax losses are met. Determining decline in value of shares (3) For the purposes of this section, shares are treated as declining in value if,— (a) on the disposal of the shares, the amount for which they were disposed of is less than the deduction for the cost of the shares; or (b) when the shares have not been disposed of, their value as calculated under subpart EB (Valuation of trading stock (including dealer’s livestock)) or otherwise declines. Defined in this Act: amount , company , deduction , group of companies , loan , loss balance , pay , share , tax loss , tax year , Compare: 2004 No 35 s IG 2(6) Section IC 12(1): substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 83(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109). Section IC 12(2) heading: substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 83(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109). Section IC 12(2): substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 83(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109). Section IC 12 list of defined terms loan : inserted (with effect on 1 April 2008), on 7 September 2010, by section 83(3) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).