Income tax – Natural love and affection exception to debt remission income for look-through company
This Question We’ve Been Asked considers whether a look-through company (LTC) derives debt remission income when a close friend or family member of the LTC’s shareholders forgives a loan made to the LTC. It concludes that s EW 46C prevents the LTC from deriving debt remission income where all of the shareholders and the close friend or family member have natural love and affection for each other. It also concludes that the Commissioner will generally accept that the shareholders and the close friend or family member have natural love and affection for each other.
Income Tax Act 2007, ss EW 31, EW 46C, HB 1, YA 1 (“look-through interest”)
Byrne v Bishop [2001] 3 NZLR 780
Director of Public Prosecutions (Vic) v Le
[2007] HCA 52
Fisher v Kirby [2013] NZFLR 463
PH v GH [2013] NZFLR 387
Rumford Estate (Re), [1996] O.J. No.3484
Taylor v Commissioner of Stamp Duties [1924] NZLR 499