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  • If you sold your shares just before receiving the return of capital on 7 December 2011

    Capital gain on the sale of UXC shares

    A CGT event happened when you sold your UXC shares.

    You made a capital gain if your cost base per share at the time you sold them was less than the amount you received for each share.

    If you had owned your UXC shares for more than 12 months you can apply the CGT discount to reduce the capital gain by half.

    Capital gain on the capital return

    Another CGT event happened on 7 December 2011 when you received the return of capital on the UXC shares that you owned on 2 December 2011.

    Your capital gain is the amount of the return of capital you received.

    If you had owned your UXC shares for more than 12 months you can apply the CGT discount to reduce the capital gain by half (after applying any current year or previous year unapplied capital losses to the gain).

    Example

    Claire purchased 4,000 UXC shares in April 2010. She paid $2,040 for the shares ($0.51 per share) plus $20 brokerage so her cost base (and reduced cost base) when she purchased them is $2,060.

    As Claire still owned her 4,000 UXC shares on 2 December 2011 she was entitled to receive the return of capital.

    Claire sold her 4,000 UXC shares on 5 December 2011 for $0.45 per share. She received $1,800 and paid $25 brokerage.

    Claire received a total of $80 (4,000 x $0.02) in the return of capital on 7 December 2011.

    Calculating the capital gain or loss on the sale of her shares

    Capital proceeds

     

    $1,800

    Cost base

    amount paid for the shares, plus

    $2,040

     

    brokerage on purchase, plus

    $20

     

    brokerage on sale

    $25

    Total reduced cost base

     

    $2,085

    Capital loss

    (capital proceeds minus total reduced cost base)

    $1,800 - $2,085 =

    ($285)

    The CGT discount will not apply in this case as Claire has made a capital loss.

    Claire must take the $285 capital loss into account in working out her total net capital gains to include at the CGT item of her 2011-12 tax return (supplementary section).

    Capital gain on the return of capital payment

    Because Claire had sold all of her UXC shares by 7 December 2011 when she was paid the return of capital, she has made a capital gain of $80 (the return of capital amount received).

    Applying the capital loss to the capital gain

    Assume that Claire has no other capital gains or capital losses for the 2011-12 year and no unapplied capital loses from earlier years.

    Claire must apply the capital loss from the sale of her shares to the capital gain made on the return of capital as follows:

    $80 capital gain minus $285 capital loss = $205 capital loss

    Claire's capital loss for the year is greater than her capital gain. She therefore reduces the capital gain to zero and has a net capital loss to carry over and use to reduce future capital gains.

    Attention

    If a capital gain remains after applying current and prior year capital losses, the CGT discount can be used to reduce the gain by half.

    End of attention

    Recording the capital loss on the tax return

    Claire will include at the CGT item in her tax return (supplementary section):

    • total current year capital gains of $80
    • net capital losses carried forward to later income years $205
    • net capital gain of $0.
      Last modified: 09 Aug 2012QC 26354