Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-95 - VALUE SHIFTING  

Division 725 - Direct value shifting affecting interests in companies and trusts  

Subdivision 725-D - Consequences for down interest or up interest as CGT asset  

SECTION 725-240   CGT consequences; meaning of adjustable value  

725-240(1)  
The CGT consequences for you of a * direct value shift are of one or more of these 3 kinds:

(a)  there are one or more * taxing events generating a gain for * down interests of which you are an affected owner (see subsection (2) );

(b)  the * cost base and * reduced cost base of down interests of which you are an * affected owner are reduced (see subsection (3) );

(c)  the cost base and reduced cost base of * up interests of which you are an affected owner are uplifted (see subsection (4) ).

Note:

If there is a taxing event generating a gain, CGT event K8 happens. See section 104-250 .

Taxing event generating a gain

725-240(2)  
To work out:

(a)  whether under the table in section 725-245 there is a * taxing event generating a gain for you on a * down interest; and

(b)  if so, the amount of the gain;

assume that the adjustable value from time to time of that or any other * equity or loan interest in the * target entity is its * cost base.

Note:

For example, for that purpose the question whether the interest has a pre-shift gain or a pre-shift loss is determined on the basis that the interest ' s adjustable value is its cost base.

Reduction or uplift of cost base and reduced cost base

725-240(3)  
The * cost base and the * reduced cost base of a * down interest are reduced at the * decrease time to the extent that section 725-250 provides for the * adjustable value of the interest to be reduced.

725-240(4)  
The * cost base and the * reduced cost base of an * up interest are uplifted at the * increase time to the extent that section 725-250 provides for the * adjustable value of the interest to be uplifted.

725-240(5)  


However, the * cost base or * reduced cost base is uplifted only to the extent that the amount of the uplift is still reflected in the *market value of the interest when a later * CGT event happens to the interest.

725-240(6)  
To work out:

(a)  whether the * cost base or * reduced cost base of the interest is reduced or uplifted; and

(b)  if so, by how much;

assume that:

(c)  the adjustable value from time to time of that or any other * equity or loan interest in the * target entity is its cost base or reduced cost base, as appropriate; and

(d)  if the interest is an * up interest because it was issued at a * discount - the adjustable value of the interest immediately before it was issued was its cost base or reduced cost base, as appropriate, when it was issued.

Note:

For example, for that purpose the question whether the interest has a pre-shift gain or a pre-shift loss is determined on the basis that the interest ' s adjustable value is its cost base or reduced cost base, as appropriate.

Reductions and uplifts also apply to pre-CGT assets

725-240(7)  
A reduction or uplift occurs regardless of whether the entity that owns the interest * acquired it before, on or after 20 September 1985.


 

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