ATO Interpretative Decision

ATO ID 2003/966 (Withdrawn)

Income Tax

Division 149B: transfer of shares on death of a spouse
FOI status: may be released

This ATO ID is withdrawn from the database as it is a straight application of the law and does not contain an interpretative decision.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Where a change in majority underlying ownership occurs for the purposes of subsection 149-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997) because of the death of a spouse, is a CGT asset acquired by a company prior to 20 September 1985 taken to have been acquired after that date?

Decision

No. Where shares are transferred to a person upon the death of another person, that person is taken to have acquired the CGT asset at the time the company acquired the CGT asset.

Facts

The taxpayer acquired 'B' Class shares in a private company before 20 September 1985 (pre-CGT). The taxpayer acquired all the 'A' Class shares in the company from their spouse's estate in 1996. There have been no other changes in shareholding of the company after 19 September 1985 (post-CGT).

The company's only asset is a commercial property (the property) which was purchased pre-CGT. Buildings were constructed on the property post-CGT. These improvements are separate assets for CGT purposes and are taken, for capital gains tax purposes, to have been acquired post-CGT.

Reasons for Decision

A CGT asset is a pre-CGT asset if the conditions in section 149-10 of the ITAA 1997 are met.

From the facts provided, the conditions in paragraphs 149-10(a) and (b) of the ITAA 1997 have been satisfied. Whether the condition in paragraph 149-10(c) of the ITAA 1997 has been satisfied is dependent on whether the asset stopped being a pre-CGT asset of the company because of Division 149 of the ITAA 1997.

An asset stops being a pre-CGT asset when majority underlying interests in the asset are not held by the same ultimate owners who held those interests in the asset immediately before 20 September 1985 (see section 149-15 and subsection 149-30(1) of the ITAA 1997).

Where shares are transferred to a person upon the death of another person, that person is taken to have held the same interests as those held by the former owner (see Item 2 of subsection 149-30(3) of the ITAA 1997). The new owner is taken to have an underlying interest in the asset equal to the sum of their original interest and the lesser of the acquired interest or the former owner's interest at any time when the former owner had a percentage of the underlying interests in the asset (see subsection 149-30(4) of the ITAA 1997).

Date of decision: 10 February 2003

Year of income: Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
section 104-135
subsection 104-135(1)

Related Public Rulings (including Determinations)
Taxation Determination TD 95/10
Taxation Determination TD 2000/5
Taxation Determination TD 2001/27

Keywords
Capital gains tax
Voluntary liquidation
Deemed dividends

Business Line: Losses and CGT Centre of Expertise

Date of publication: 31 October 2003

ISSN: 1445-2782

history

	Date:	Version:
	10 February 2003	Original statement
You are here	26 March 2010	Archived

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