Section 660 — Income Tax Act 2007: Transfers with unrealised interest: interest in default

Transfers with unrealised interest: interest in default 660 1 This section applies if—

a securities are transferred with unrealised interest, b there has been a failure to pay interest due on the securities transferred, and c as a result of the failure, on the day of the transfer the value of the right to receive the unrealised interest (“the unrealised interest value”) is less than the unrealised interest.

2 The amount of the payment treated as made to the transferor under section 634(2) is taken to be the unrealised interest value instead of the amount of the unrealised interest.

3 The amount of accrued income profits under section 631(1) is taken to be the unrealised interest value instead of the amount of the unrealised interest.

4 Subsections (2) and (3) are subject to section 661 (successive transfers with unrealised interest in default).

5 For the purposes of this section and section 661, a person is treated as transferring securities of a particular kind which the person acquired later before securities of that kind acquired earlier.

6 See also section 681 (exemption for unrealised interest received by transferee after transfer).