Taxation Determination
TD 92/188
Income tax: capital gains: can a shareholder crystallise a capital loss under section 160WA if a liquidator declares that he or she expects to make a distribution during the winding up of a company?
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FOI status:
may be releasedFOI number: I 1213643| This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953, is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. |
1. No. In order for section 160WA of the Income Tax Assessment Act 1936 to apply, the liquidator must declare that the liquidator has reasonable grounds to believe, at the time of declaration, there is no likelihood that shareholders will receive any distribution in the course of winding up the company.
2. If a liquidator expects to make a distribution to shareholders, the liquidator will not be able to make a valid section 160WA declaration. Accordingly a shareholder cannot crystallise any capital loss until either a valid declaration is made (e.g. where circumstances change such that the liquidator now believes it is not likely that shareholders will receive any distribution in the course of winding up the company) or the shares are disposed of.
Example.
On 25 June 1992, a liquidator declares that shareholders will not receive a distribution of more than 2.5% of their shareholding. The liquidator suggests that a loss of 97.5% of the shareholders' holding has crystallised during the year.
The liquidator's declaration cannot operate as a valid declaration under section 160WA as the liquidator expects a distribution to be made to shareholders. Any capital loss the shareholders may have in respect of their shares will not crystallise until either a valid declaration is made by the liquidator or a disposal of the shares occurs (see Taxation Determination CGT 21).
Commissioner of Taxation
12 November 1992
Previously issued as Draft TD 92/D154
References
ATO references:
NO ADVG CHERM
Related Rulings/Determinations:
CGT 21
TD 92/101
TD 92/102
Subject References:
winding up of a company
liquidation
crystallising a capital loss
Legislative References:
ITAA 160WA
| Date: | Version: | Change: | |
| You are here | 12 November 1992 | Original ruling | |
| 29 November 2000 | Withdrawn |