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Edited version of your private ruling
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Ruling
Subject: Capital gains tax - company in liquidation - distribution
Questions and answers
Are you entitled to a capital loss on debentures held under section 104-145 of the ITAA 1997?
No
This ruling applies for the following periods:
Year ended 30 June 2012
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You have debentures in Company A
Company A is in liquidation.
You received a letter from the receiver manager notifying you of a second dividend from the company.
In the letter it notifies you that further distributions are unlikely in the medium term.
Relevant legislative provisions
Income Tax Assessment Act 1997. Section 104-145
Reasons for decision
CGT event G3 happens if a liquidator of a company declares in writing that he or she has reasonable grounds to believe that there is no likelihood that debenture holders will receive any further distribution from the company in the course of winding up (subsection 104-145(1) of the ITAA 1997). Once this declaration is made, debenture holders can choose to make a capital loss on their debentures at the time of the declaration (subsections 104-145(2) and 104-145(3) of the ITAA 1997). If you acquired your debentures prior to 20 September 1985, you cannot choose to make a capital loss (subsection 104-145(5) of the ITAA 1997).
In your case Company A is in liquidation. The declaration by the receiver and manager is that no further distributions are expected for the purposes of section 104-145 of the ITAA 1997 in the medium term. When the liquidator notifies you that no further distributions are likely a CGT event G3 occurs and you can claim a deduction for your loss.
Please note that the distribution received is not assessable income but reduces the cost base of the debentures when they are cancelled or redeemed.
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