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Edited version of your private ruling
Authorisation Number: 1012564970143
Ruling
Subject: Sale of shares
Question
Will any capital gain on the sale of the shares be assessable to you in the 2012-13 financial year?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You owned shares.
You were declared bankrupt during 20XX.
Your shares were sold in the 2012-13 financial year.
The funds were transferred to a firm. The firm then transferred the funds into the Bankrupt Estate.
You were automatically discharged from bankruptcy in the 2013-14 financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 160-30
Income Tax Assessment Act 1997 subsection 106-30(2)
Income Tax Assessment Act 1997 section 104-10
Reasons for decision
Section 106-30 of the Income Tax Assessment Act 1997 (ITAA 1997) advises that the vesting of assets in a trustee under bankruptcy law is ignored for CGT purposes. The effect of this is that the asset is still considered to be owned by the insolvent person, even though the asset is vested in the trustee.
The acts of the trustee in relation to the vested asset are taken to be the bankrupt's acts under subsection 106-30(2) of the ITAA 1997. When the shares were sold CGT event A1 happened (section 104-10 of the ITAA 1997).
Consequently, no disposal takes place on the vesting of the asset to the trustee, but a disposal of the asset by the trustee is considered to be a disposal by the insolvent person. The liability for CGT on the capital gain on disposal of the shares is borne by the insolvent person in the year of income in which the disposal occurred.
Therefore, any capital gain on the sale of the shares is assessable to you and you will be required to include this gain in your income tax return for the relevant year.
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