Income Tax Act 2007 section 111

Meaning of "contribution to the firm"

Section 111 defines how to calculate a non-active partner's "contribution to the firm" for the purposes of restricting trade loss relief under section 110.

• A partner's contribution to the firm is the total of three amounts: capital contributed (Amount A), undrawn profit share (Amount B), and any additional contribution on winding up (Amount C)
• Capital contributions are reduced by amounts already withdrawn, amounts withdrawn within five years, amounts the partner is entitled to withdraw while still a partner, and amounts reimbursable by another person
• The profit share element (Amount B) ignores any losses from the relevant trade or other trades carried on by the firm, and is calculated using generally accepted accounting practice before tax adjustments
• The section must be read alongside section 113A and any regulations under section 114, which may exclude further amounts from the calculation