Tax treatment for trading stock appropriated for non‑trade or capital purpose
10J.—(1)  This section applies where, at any time on or after 16 November 2021, a person carrying on a trade or business appropriates any trading stock of that trade or business for a purpose other than for sale or disposal in the ordinary course of any of the person’s trades or businesses in circumstances that give rise to a reasonable inference that the appropriation is permanent.
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(2)  Without limiting the generality of the expression, a person appropriates trading stock for a purpose other than for sale or disposal in the ordinary course of any of the person’s trades or businesses if the person —
(a)holds or uses the trading stock as a capital asset; or
(b)donates the trading stock.
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(3)  The following is treated for the purposes of this Act as the person’s income for the firstmentioned trade or business in subsection (1) for the year of assessment relating to the basis period in which the date of appropriation of the trading stock falls:
(a)where the appropriation is by way of a donation of the trading stock that qualifies for a deduction under section 37(3)(b), (e) or (f) for any year of assessment — an amount equal to the person’s cost of acquiring, making or constructing the trading stock;
(b)in any other case — an amount equal to the open market value of the trading stock as at the date of the appropriation.
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(4)  Section 14 applies for the purpose of ascertaining such part of the income mentioned in subsection (3) that is chargeable with tax under this Act, as if the trading stock were sold on the date of the appropriation.
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(5)  Where this section applies, then the person must, at the time of lodgment of the person’s return of income for the year of assessment relating to the basis period in which the trading stock is appropriated, or such later time as the Comptroller may allow, give notice of the appropriation and specify the particulars of the appropriation in the form and manner specified by the Comptroller.
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(6)  The Minister may by rules made under section 7, and subject to any condition specified in the rules —
(a)exempt any person or class of persons from subsection (5); or
(b)provide that subsection (5) does not apply in a particular case or class of cases.
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(7)  Rules made for the purposes of subsection (6) may be made to take effect from (and including) 16 November 2021.
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(8)  Where subsection (3) applies to a person for a year of assessment and that person has not been assessed accordingly in that year of assessment, any income arising because of that subsection is treated as the person’s income for the year of assessment in which the Comptroller discovers sufficient facts on which the Comptroller may reasonably conclude that there has been such appropriation.
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(9)  In this section —
“open market value”, in relation to any trading stock, means —
(a)the amount that would be realised if the trading stock had been sold on the open market on the date of appropriation of the trading stock; or
(b)where the Comptroller is satisfied by reason of the special nature of the trading stock that it is not practicable to determine the amount mentioned in paragraph (a), such other value as appears to the Comptroller to be reasonable in the circumstances;
“trading stock”, in relation to a trade or business —
(a)means property of any description (whether movable or immovable) —
(i)that is sold in the ordinary course of trade or business; or
(ii)that would be so sold if it were mature or if its manufacture, preparation or construction were complete; but
(b)does not include any material used in the manufacture, preparation or construction of any property mentioned in paragraph (a).
[10P
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