Look Through Companies Q&A
The NZICA Tax Team has compiled a list of commonly asked questions about Look Through Companies.We held two webinars presented by Frank Owen in February 2011 on the LTC regime. A number of questions were asked by attendees covering areas such as the count test; transition from QC to LTC, partnership or sole trader; and the loss limitation rule. NZICA's tax team has recorded and edited these questions and answers and also added references. Below are a few examples; the full collection can be viewed by downloading the pdf.
Download the LTC Q&A (PDF, 510KB)
Example questions
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Do the associated persons rules apply to beneficiaries for the purposes of the five or fewer persons LTC count test?
Yes, the associated persons rules do apply to beneficiaries to the extent that they are “relatives”. All associated persons in an LTC count as one owner.
[Reference: s YA 1, definitions of “look-through company”, paragraph (d); “relative”, paragraph (a)(v). Tax Information Bulletin, Vol 23, No 1, February 2011, p 49].
- How many times do you count an individual who is a shareholder in the LTC in their own right and who is also a beneficiary of a trust which is also a shareholder?
In this case the individual will be counted only once.
[Reference: s YA 1, definition of “look-through counted owner”. Tax Information Bulletin, Vol 23, No 1, February 2011, p 49. IR 879 (April 2011) Look-through companies – a guide to the look-through company rules, p 6 – 7].
- If there is an individual who is a shareholder in his/her own right and is also a trustee of a shareholder trust do they get counted twice?
Yes, because the person is holding shares in two separate capacities.
[Reference: s YA 1, definitions of “look-through company”, “look-through counted owner”. Tax Information Bulletin, Vol 23, No 1, February 2011, pp 48 – 49. IR 879 (April 2011) Look-through companies – a guide to the look-through company rules, p 7].
29 September 2011