CD 44 Available capital distribution amount
Formula for calculating amount of available capital distribution

(1)

For a share (the share) on the liquidation of the company, the available capital distribution amount is calculated using the formula—

(receipt − asc per share) × (capital gains +
(capital property distributed − cost) − capital losses)
÷ (total receipts − total asc).

Definition of items in formula

(2)

In the formula,—

(a)

receipt is the amount received by the shareholder on the liquidation for the share:

(b)

asc per share is the available subscribed capital per share calculated under the ordering rule for the share at the time of the liquidation:

(c)

capital gains is the total of the capital gain amounts available for distribution to shareholders in the company on the liquidation, but excluding any gain occurring when the company distributes property to a shareholder on the liquidation:

(d)

capital property distributed is the total market value of capital property of the company distributed to shareholders on the liquidation:

(e)

cost is the total cost to the company of the capital property included in the capital property distributed item:

(f)

capital losses is the total of capital loss amounts of the company arising in the 1992–93 tax year or a later tax year, but excluding any loss occurring when the company distributes property to shareholders on the liquidation:

(g)

total receipts is the total of all amounts received by shareholders on the liquidation:

(h)

total asc is the total of the available subscribed capital of all shares in the company at the time of the liquidation.

Positive amounts

(3)

Despite subsection (1), the available capital distribution amount per share is zero if either multiplier in the formula is negative.

When foreign company information inadequate

(4)

Despite subsection (1), the available capital distribution amount is zero if—

(a)

the company is not resident in New Zealand; and

(b)

the shareholder cannot obtain sufficient information to calculate the actual available capital distribution amount.

Capital gain amount: bonus issued capital gains

(5)

A capital gain amount is treated as still being available for distribution to the extent to which—

(a)

it has been applied to pay up a bonus issue made after 30 September 1988; and

(b)

the bonus issue is a non-taxable bonus issue; and

(c)

the bonus issued share is still on issue at the time of the company’s liquidation.

This subsection is overridden by subsection (6).

Capital gain amount: capital gains after 31 March 1988 and before 1992–93

(6)

A capital gain amount, derived after 31 March 1988 and before the 1992–93 tax year, is not available for distribution to the extent to which a capital loss amount has arisen for the company in the tax year in which the capital gain amount was derived or in a later tax year before the 1992–93 tax year. Capital loss amounts are offset against capital gain amounts in the chronological order in which each arose and, to the extent offset, are then disregarded for the purposes of this subsection.

Capital gain amount: when capital gain amounts arise

(7)

For the purposes of this section, a company derives a capital gain amount if,—

(a)

after 31 March 1988, it disposes of capital property for an amount of consideration that is more than the cost of the property to the company, including a disposal that the company is treated as making under section DB 26 (Amount from profit-making undertaking or scheme and not already in income) or DB 27 (Amount from major development or division and not already in income); the capital gain amount is the excess; or

(b)

after 31 March 1988, it receives a capital gain, including a gift, and no part is assessable income of the company; the capital gain amount is the amount of the capital gain; or

(c)

an amount is derived by the company from another company on liquidation of the other company that is excluded from being a dividend as a result of section CD 26(2)(b) and this section; or

(d)

an amount is derived by the company that is attributable to a revaluation of livestock in the 1992–93 tax year or a later tax year under section 86D of the Income Tax Act 1976 or section EC 16 (Valuation under herd scheme) or EC 20 (Herd livestock disposed of before values determined); or

(db)

an amount is derived by the company that is attributable to the difference between the consideration for disposal or acquisition of livestock and the value of that livestock under section EC 4C (Value and timing of transfers); or

(e)

the amount is described in section CZ 9(1) (Available capital distribution amount: 1965 and 1985–1992).

Capital gain amount: amalgamated company inheriting gain

(8)

An amalgamated company is treated as deriving a capital gain amount at the time of the amalgamation equal to a capital gain amount of an amalgamating company to the extent to which—

(a)

the amalgamating company ends its existence on the amalgamation; and

(b)

the amalgamating company’s capital gain amount was available for distribution at the time and was not distributed to anyone other than the amalgamated company.

Capital gain amount: consideration when debt forgiven within economic group

(8B)

The amount of a debt to which section EW 46C (Consideration when debt forgiven within economic group) applies does not give rise to a capital gain amount if section CD 43(6D) does not apply to it.

Capital gain amount: FIF income calculated using fair dividend rate or cost methods

(8C)

A company derives a capital gain amount for the purposes of this section in relation to an attributing interest in a FIF for which the company uses the fair dividend rate method or the cost method to calculate their FIF income for a period. The capital gain amount is an amount equal to the greater of—

(a)

the total amount of dividends and gains on disposal derived from the interest in the period that is excluded income under section CX 57B (Amounts derived during periods covered by calculation methods) reduced by the total amount of FIF income the company has from that interest for the same period; and

(b)

zero.

Gains on disposal

(8D)

For the purposes of subsection (8C)(a), a gain on disposal is the difference between the consideration on disposal of the interest and the cost of acquisition of the interest.

When capital losses arise

(9)

For the purposes of this section, a company incurs a capital loss if it disposes of capital property for an amount of consideration that is less than—

(a)

for property that is a building for which no depreciation loss arises under section EE 48(2) and (3) (Effect of disposal or event), the adjusted tax value of the property at the date of disposal, if the property is an item of depreciable property; or

(b)

the cost of the property to the company at the date of disposal, if the property is not an item of depreciable property.

Capital loss amount

(9BA)

The capital loss amount for a disposal referred to in subsection (9) is equal to the deficit referred to in that subsection for the disposal.

Capital losses amount: herd scheme

(9B)

For the purposes of this section, a company incurs a capital loss if it incurs a loss that is attributable to the difference between the consideration for disposal or acquisition of livestock and the value of that livestock under section EC 4C.

Capital losses amount: company existing before 1 April 1988

(10)

In the case of a company that existed before 1 April 1988, the capital losses amount cannot be more than the total of—

(a)

the amount of the capital gains item in the formula in subsection (1) to the extent derived after 31 March 1988; and

(b)

the amount of the capital property distributed item, minus the amount of the cost item, in the formula.

Company common interest transactions

(10B)

An amount derived or incurred by a company (company A) on disposing of property (the property) to another company (company B) is not a capital gain amount or a capital loss amount if—

(a)

at the time of the disposal, a group of persons holds, for companies A and B,—

(i)

common voting interests that add up to at least 85%; and

(ii)

if a market value circumstance exists for company A or company B, common market value interests that add up to at least 85%; and

(b)

on the liquidation of company A, the aggregate total given by applying the formula in subsection (10C) for all companies that own part of the property (owning companies) is 85% or more.

Formula

(10C)

For the purposes of subsection (10B)(b), for an owning company, the formula is—

commonality interest × ownership interest.

Definition of items in formula

(10D)

In the formula in subsection (10C),—

(a)

commonality interest is, if the owning company is company A, 100%, or, if the owning company is not company A, the percentage of common holding by a group of persons, for the owning company and company A, of—

(i)

common voting interests; or

(ii)

if a market value circumstance exists for the owning company or company A, common market value interests, if they are greater than the common voting interests:

(b)

ownership interest is the percentage ownership of the property, by market value, for the owning company.

Relationship between subsections

(10E)

Subsection (10B) is overridden by subsection (7)(c).

Related person transactions[Repealed]

(11)

[Repealed]

Close companies liquidations[Repealed]

(12)

[Repealed]

Reinvested exempt dividends

(13)

When a capital gain amount, a capital loss amount, or the cost of capital property is determined, the cost of any shares subscribed for by the company in another company does not include any consideration for the subscribed shares that is excluded from the available subscribed capital of the other company under section CD 43(7)(b) or (8).

Amounts written up

(14)

When a capital gain amount, a capital loss amount, or the cost of capital property is determined, the cost of the relevant capital property is increased to the extent to which—

(a)

the value of the property is written up in the company’s books; and

(b)

because it was attributed to the write-up,—

(i)

an amount paid before 11 June 1965 is treated as described in section CZ 9(2)(a); or

(ii)

an issue of a share before 1 April 1988 is treated as described in section CZ 9(2)(b).

Relationship with section CZ 9B[Repealed]

(14B)

[Repealed]

Meaning of related person[Repealed]

(15)

[Repealed]

Look-through relatives and nominees[Repealed]

(16)

[Repealed]

Look-through interposed companies[Repealed]

(17)

[Repealed]

Meaning of capital property

(18)

In this section, capital property means property of the company that is not revenue account property, and includes an attributing interest in a FIF for which income is calculated using either the fair dividend rate method or the cost method.

Defined in this Act: adjusted tax value, amalgamated company, amalgamating company, amalgamation, amount, assessable income, attributing interest, available capital distribution amount, available subscribed capital, bonus issue, capital property, close company, company, cost method, depreciable property, dividend, fair dividend rate method, FIF, FIF income, group of persons, income, liquidation, market value circumstance, market value interest, non-taxable bonus issue, ordering rule, pay, relative, resident in New Zealand, revenue account property, share, shareholder, tax year, trustee, voting interest

Compare: 2004 No 35 s CD 33

Section CD 44(7)(b): amended (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 4(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section CD 44(7)(db): inserted (with effect on 28 March 2012), on 24 February 2016, by section 75(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section CD 44(8B) heading: inserted (with effect on 1 April 2008), on 30 March 2017, by section 23(1) (and see section 23(8)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(8B): inserted (with effect on 1 April 2008), on 30 March 2017, by section 23(1) (and see section 23(8)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(8C) heading: inserted, on 29 March 2018, by section 16(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44(8C): inserted, on 29 March 2018, by section 16(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44(8D) heading: inserted, on 29 March 2018, by section 16(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44(8D): inserted, on 29 March 2018, by section 16(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44(9) heading: replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 30 March 2017, by section 23(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(9): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 30 March 2017, by section 23(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(9)(a): amended, on 29 March 2018 (with effect on 1 April 2008 and applying for the 2008–09 and later income years), by section 16(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44(9BA) heading: inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 30 March 2017, by section 23(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(9BA): inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 30 March 2017, by section 23(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(9B) heading: inserted (with effect on 28 March 2012), on 24 February 2016, by section 75(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section CD 44(9B): inserted (with effect on 28 March 2012), on 24 February 2016, by section 75(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).

Section CD 44(10B) heading: replaced, on 30 March 2017, by section 23(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(10B): amended (with effect on 1 April 2010), on 30 March 2017, by section 23(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(10B): replaced, on 30 March 2017, by section 23(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(10C) heading: replaced, on 30 March 2017, by section 23(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(10C): replaced, on 30 March 2017, by section 23(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(10D) heading: inserted, on 30 March 2017, by section 23(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(10D): inserted, on 30 March 2017, by section 23(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(10E) heading: inserted, on 30 March 2017, by section 23(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(10E): inserted, on 30 March 2017, by section 23(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(11) heading: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), pursuant to section 21(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44(11): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44(12) heading: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), pursuant to section 21(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44(12): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44(14B) heading: repealed, on 30 March 2017 (applying for the 2008–09 and later income years), pursuant to section 23(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(14B): repealed, on 30 March 2017 (applying for the 2008–09 and later income years), by section 23(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44(15) heading: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), pursuant to section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44(15): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44(16) heading: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), pursuant to section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44(16): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44(17) heading: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), pursuant to section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44(17): repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 21(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44(18): amended, on 29 March 2018, by section 16(3) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44 list of defined terms adjusted tax value: inserted (with effect on 1 April 2008), on 30 March 2017, by section 23(6) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44 list of defined terms assessable income: inserted (with effect on 1 April 2008), on 29 August 2011, by section 4(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).

Section CD 44 list of defined terms attributing interest: inserted, on 29 March 2018, by section 16(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44 list of defined terms cost method: inserted, on 29 March 2018, by section 16(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44 list of defined terms depreciable property: inserted (with effect on 1 April 2008), on 30 March 2017, by section 23(6) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44 list of defined terms fair dividend rate method: inserted, on 29 March 2018, by section 16(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44 list of defined terms FIF: inserted, on 29 March 2018, by section 16(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44 list of defined terms FIF income: inserted, on 29 March 2018, by section 16(4) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section CD 44 list of defined terms group of persons: inserted, on 30 March 2017, by section 23(7) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44 list of defined terms market value circumstance: inserted, on 30 March 2017, by section 23(7) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44 list of defined terms market value interest: inserted, on 30 March 2017, by section 23(7) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).

Section CD 44 list of defined terms related person: repealed, on 1 April 2010, by section 594 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).

Section CD 44 list of defined terms voting interest: inserted, on 30 March 2017, by section 23(7) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).