ATO Interpretative Decision
ATO ID 2002/951 (Withdrawn)
Income Tax
Loss on sale of shares - acquired with a profit making intention on or after 20 September 1985FOI status: may be released
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This ATO ID is withdrawn because it merely restates the operation of subsection 25-40(2) of the Income Tax Assessment Act 1997 (ITAA 1997), and does so where the preconditions in subsection 25-40(1) have not been clearly established. This kind of product is not suited to discussing the limited circumstances in which sections 15-15 and 25-40 may apply.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxpayer entitled to a deduction under section 25-40 of the Income Tax Assessment Act 1997 (ITAA 1997) for a loss on the sale of shares acquired on or after 20 September 1985?
Decision
No. The taxpayer is not entitled to a deduction under section 25-40 of the ITAA 1997 for a loss on the sale of shares acquired on or after 20 September 1985.
Facts
The taxpayer acquired shares with the intention of making a profit on the resale of those shares. The shares were acquired on or after 20 September 1985.
The shares were not acquired with the intention of long term holding for capital appreciation or to derive assessable income as dividends or bonus share issues.
The taxpayer made a net loss from buying and selling shares.
The taxpayer is not in a business of share trading.
Reasons for Decision
Subsection 25-40(1) of the ITAA 1997 allows a deduction for a loss arising from the carrying out of a profit-making undertaking if any profit from that undertaking would have been included in the taxpayer's assessable income by section 15-15 of the ITAA 1997.
However, subsection 25-40(2) of the ITAA 1997 provides that a loss from a profit-making undertaking is not an allowable deduction if the loss arises in respect of the sale of property acquired on or after 20 September 1985. The term 'property' encompasses not only physical assets but also intangible assets such as shares and securities.
As the shares constitute property acquired by the taxpayer on or after 20 September 1985, the loss on the sale of the shares is not an allowable deduction under section 25-40 of the ITAA 1997.
Date of decision: 3 May 2002Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
section 15-15
section 25-40
subsection 25-40(1)
subsection 25-40(2)
Keywords
Current year losses
Profit making purpose
Shares
Deductions & expenses
ISSN: 1445-2782
| Date: | Version: | |
| 3 May 2002 | Original statement | |
| You are here | 11 August 2016 | Archived |