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Edited version of private ruling
Authorisation Number: 1011577257245
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Ruling
Subject: Capital gains tax (CGT) - debentures - capital losses
Are you entitled to claim a capital loss in relation to your debenture stock for the 2010-11 income year?
No.
This ruling applies for the following period:
1 July 2010 - 30 June 2011
The scheme commenced on:
1 July 2010
Relevant facts and circumstances
You obtained debenture stock in a company.
A receiver and manager was appointed for the company several years after you obtained the debenture stock.
In a letter, the receiver and manager stated the following:
· the estimated return for debenture holders would be less than their full investment
· the time frame in which these funds will be returned to debenture holders is anticipated to be over several years.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-25
Income Tax Assessment Act 1997 Section 104-145.
Reasons for decision
You make a capital gain or capital loss if a CGT event happens to a CGT asset. CGT assets include debenture stock in a company.
Where you hold debentures in a company that is under liquidation or administration, you may realise a capital loss in one of the following ways:
· CGT event C2 which happens when debentures are cancelled as the result of the dissolution of a company, or
· CGT event G3 which happens when a liquidator or administrator declares in writing that there is no likelihood that the shareholder will receive any further distribution in the course of the winding up of the company.
In your case:
· it is considered that the debentures you own in the company still exist and have not been cancelled. As such, CGT event C2 has not yet occurred, and
· the receiver and manager estimated that debenture holders would not recoup the full amount of their investment, and these amounts would only be settled over several years. As these amounts are yet to be finalised, CGT event G3 has not yet occurred.
In summary, as no CGT event has yet to occur in relation to your debentures, you are not entitled to a capital loss.
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