INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART IIIA - CAPITAL GAINS AND CAPITAL LOSSES  

Division 19B - Share value shifting arrangements  

SECTION 160ZZRQ   CONSEQUENCES OF VALUE SHIFT TO POST-CGT SHARE  

160ZZRQ(1)   Section sets out consequences.  

If the requirements of section 160ZZRL are satisfied and a particular increased value share is a post-CGT share, the following are the consequences.

160ZZRQ(2)   Deemed capital gain.  

If:

(a) in respect of each decreased value share (a ``different person share'' ):

(i) held by a person other than the holder of the particular increased value share; and

(ii) for which there was a material decrease in market value;

this Part were applied on the following assumptions:

(iii) that a part of the different person share had been disposed of by its holder immediately after the decrease in value of the share;

(iv) that the consideration for the disposal was an amount worked out using the formula:

Increase in market value   of particular increased                             value share                         Total market value     increase

×

Decrease in market value of different person share

(v) that the cost base or indexed cost base of the part was the amount worked out by multiplying the amount that would be the cost base or indexed cost base for the whole of the share if it were being disposed of at the time, by the fraction worked out using the formula:

Amount worked out under                                     subparagraph (iv)                                     Market value of the share immediately before the decrease

(b) as a result a capital gain would accrue to the holder;

then, for the purposes of this Act, a capital gain of that amount is taken to accrue to the holder for the year of income in respect of the disposal of an asset (even though no asset was actually disposed of).

160ZZRQ(3)   Adjustment to acquisition consideration etc. for decreased value share.  

For the purpose of any application of this Part to a later disposal by the holder of any decreased value share for which there was a material decrease in market value:

(a) all amounts that, under section 160ZH (which deals with cost base, indexed cost base and reduced cost base) are attributable to any such share in relation to the period before the decrease in value took place;

are taken to be reduced by:

(b) the fraction worked out using the formula:

Increase in market   value of particular     increased value share   Total market value   increase

×

Decrease in market value of                             decreased value share                               Market value of decreased value share immediately before the decrease

160ZZRQ(4)   Adjustment to cost base expenditure for increased value share.  

If there is a material increase (see subsection 160ZZRO(2) ) in the market value of the particular increased value share then, for the purposes of any application of this Part to a later disposal of the particular increased value share by the holder, the holder is taken to have incurred in relation to the share, at the time of the increase in its market value, expenditure to which paragraph 160ZH(1)(c) , (2)(c) or (3)(c) applies that is equal to the sum of the amounts qualifying under subsections (5) and (6) of this section.

160ZZRQ(5)   Deemed expenditure referable to decreased value shares of different persons.  

One amount qualifying for the purposes of subsection (4) is the smaller of the following:

(a) the amount worked out by multiplying the increase in market value of the particular increased value share, to the extent that the increase is reflected in its market value at the time of the later disposal, by the following fraction:

Sum of decreases in market value of all                               different person shares                               Sum of decreases in market value of all decreased value shares

(b) the sum of the amounts worked out for each different person share using the following formula:

Increase in market value of particular increased value                                           share                                         Total market value increase

×

Decrease in market value   of different person share

160ZZRQ(6)   Deemed expenditure referable to decreased value shares of same person.  

The other amount qualifying for the purposes of subsection (4) is the smallest of the following:

(a) the amount worked out by multiplying the increase in market value of the particular increased value share, to the extent that the increase is reflected in its market value at the time of the later disposal, by the following fraction:

1   −   fraction in paragraph (5)(a)

(b) the sum of the amounts worked out for each share (a ``same person share'' ):

(i) held by the person who holds the particular increased value share; and

(ii) for which there was a material decrease in market value;

using the following formula:

Increase in market value of particular increased value                                           share                                         Total market value increase

×

Decrease in market value     of same person share

(c) the sum of the amounts of reductions that would result from the application of subsection (3) if that subsection applied only to same person shares.