Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-95 - VALUE SHIFTING  

Division 725 - Direct value shifting affecting interests in companies and trusts  

Subdivision 725-E - Consequences for down interest or up interest as trading stock or a revenue asset  

SECTION 725-310   Consequences for down interest or up interest as trading stock  

725-310(1)    
The consequences of the * direct value shift for your * trading stock are of one or more of these 3 kinds:


(a) the * adjustable values of * down interests of which you are an * affected owner are reduced (see subsection (2));


(b) the adjustable values of * up interests of which you are an affected owner are uplifted (see subsection (3));


(c) there are one or more * taxing events generating a gain for down interests of which you are an affected owner (see subsection (5)).

Effect of reduction or uplift of adjustable value

725-310(2)    


If the * adjustable value of a * down interest that is your *trading stock is reduced under section 725-335 , you are treated as if:


(a) * immediately before the * decrease time, you had sold the interest to someone else (at * arm ' s length and in the ordinary course of business) for its * adjustable value immediately before the decrease time; and


(b) immediately after the decrease time, you had bought the interest back for the reduced adjustable value.


725-310(3)    
If the * adjustable value of an * up interest that is your * trading stock is uplifted under section 725-335 , you are treated as if:


(a) * immediately before the * increase time, you had sold the interest to someone else (at * arm ' s length and in the ordinary course of business) for its * adjustable value immediately before the increase time; and


(b) immediately after the increase time, you had bought the interest back for the uplifted adjustable value.

725-310(4)    


However, the increase in the cost of an * up interest because of paragraph (3)(b) is taken into account from time to time only to the extent that the amount of the increase is still reflected in the *market value of the interest.
Note:

The situations where the increase in cost would be taken into account include:

  • • in working out your deductions for the cost of trading stock acquired during the income year in which the increase time happens; and
  • • the end of an income year if the interest ' s closing value as trading stock is worked out on the basis of its cost; and
  • • the start of the income year in which the interest is disposed of, if that happens in a later income year and the interest ' s closing value as trading stock at the end of the previous income year was worked out on the basis of its cost.
  • If the interest stops being trading stock, section 70-110 treats you as having disposed of it.



    Taxing event generating a gain

    725-310(5)    
    For each * taxing event generating a gain under an item in the table in subsection 725-335(3) , the gain is included in your assessable income for the income year in which the * decrease time happens.


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