IS22/03 – Land Sale Rules & Co-Ownership Changes
Transfers of land will give rise to considerations of the application of the Brightline Test. IS 22/03 is a usefull interpretation statement in this regard, which we briefly digressed in our July Newsletter.
What is disconcerning is the IRD’s view that : There is a disposal when the parties proportional interest change.
An example would be a situation where land is held by owners as joint tenants in common, who cannot for whatever reason separate their interests at the outset.
Once the separation of interests occurs no ownership interest is fully disposed off. IRD is of the view that this separation will amount to a disposal to the extent of the reduction. Consequently, the Brightline period will restart in relation to the proportionate interest in the land that was transfererd but not with respect to the balance of the land. More importantly IRD considers such a separation of interest as a disposal.
August 2022
