A vendor inherited her late father's house eight months ago and now wants to sell it. She asks whether the bright-line test will tax any gain. What is correct?
Correct Answer
C) The bright-line test does not apply to a property she inherited.
Inland Revenue says the bright-line test does not apply if you are the executor or administrator of a deceased estate or you inherited the property. The beneficiary can sell within 2 years without a bright-line liability. Other land sale rules could still apply in unusual cases, such as dealing.
Why This Is the Correct Answer
Inheritance is one of the situations Inland Revenue lists where the bright-line test does not apply.
Why the Other Options Are Wrong
Option A: It applies because she will sell within 2 years of inheriting the property.
Inland Revenue states that the bright-line test does not apply if you inherited the property.
Option B: It applies unless she moves in and lives there for at least 12 months first.
No occupation period is needed; inheritance takes the sale outside the bright-line test.
Option D: It applies to half the gain because the estate held the property first.
There is no partial application for inherited property; the test does not apply.
Background Knowledge for Finance
Source: https://www.ird.govt.nz/property/buying-and-selling/when-you-need-to-pay/the-brightline-test
Exam Tip for Finance
Inherited property and executors' sales are outside the bright-line test.
Common Mistakes to Avoid on Finance Questions
- •Applying the 2-year clock from the date of inheritance.
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