ATO Interpretative Decision
ATO ID 2003/335 (Withdrawn)
Income Tax
Continuity of ownership test: transfer of shares from a deceased estate to a beneficiaryFOI status: may be released
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This ATOID is withdrawn as a straight forward application of the law.This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Will the transfer of 50% of the shares of a loss company by the trustee of a deceased estate to a beneficiary of the estate cause the loss company to fail the ownership conditions in Division 165 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The transfer of the shares of the loss company will not cause the loss company to fail the test in Division 165 of the ITAA 1997 as a transfer of shares to the beneficiary of a deceased estate is taken as continuing the beneficial ownership of the shares under paragraph 165-205(b) of the ITAA 1997
Facts
An individual held 2 of the 4 shares on issue in a loss company, while an associate and another person each held one share. The individual died and their 50% shareholding was subsequently transferred by the trustee of the estate to the associate in their capacity as a beneficiary of the estate. The associate has held both shares since that time and has since acquired the fourth share. The company is now in a position to recoup prior year losses.
Reasons for Decision
Paragraph 165-205(b) of the ITAA 1997 provides that shares a person owned beneficially at the time of death are taken to continue to be owned by that person after they die if the shares are then owned by someone who received them as a beneficiary of the their estate.
In this case, the associated received the deceased's shares in the loss company in their capacity as a beneficiary of the estate, and has continued to hold those shares. It follows that whilst the associate remains the beneficial owner of those shares, paragraph 165-205(b) of the ITAA 1997 provides that the deceased will be taken to continue to be the beneficial owner of that 50% shareholding in the loss company which, together with the original 25% shareholding of the associate, will enable the company to satisfy the continuity of ownership test in Division 165 of the ITAA 1997.
Date of decision: 11 March 2003Year of income: Year ended 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
Division 165
paragraph 165-205(b)
Keywords
Continuity of ownership
Deceased taxpayers
Underlying ownership & interests
Date reviewed: 3 April 2014
ISSN: 1445-2782
| Date: | Version: | |
| 11 March 2003 | Original statement | |
| You are here | 11 April 2014 | Archived |