CASE Y59

Members:
BJ McMahon

Tribunal:
Administrative Appeals Tribunal

Decision date: 13 November 1991

BJ McMahon (Deputy President)

This is an application to review a decision to include in the applicant's taxable income for capital gains tax purposes the adjusted profit on the sale of the subject property. The applicant was incorporated on 25 June 1920. Between 1926 and 1958 it acquired the subject property in Provincial City, parcel by parcel, at an historic cost of $56,685 for the land and $495,346 for the buildings which it erected upon the land. In the premises, it carried on a business of cold storage and ice manufacturer. It also had some investment income. From 1 May 1983, income from cold storage and ice manufacturing ceased and the applicant then derived income in the main from interest, dividends, rental and storage.

2. On 18 October 1985, there was a change in the majority shareholding in the applicant and by 28 November 1985, 100 per cent of the shares had been sold at a total price of $1,626,576. At the time of the change in the majority of shareholding, by far the major asset of the applicant was the subject property. The applicant also owned certain livestock and was subject to certain claims which were later settled. The existence of these additional assets and claims apparently came as a surprise to the purchaser, as did the fact that the applicant had potential tax advantages in that at the time of the takeover, eunrecouped previous years' losses totalled $381,837. The freezing works, on which depreciation had been claimed and allowed, had a depreciated value for tax purposes at the time of takeover of $347,767. Soon after the takeover the freezing works were demolished and the applicant claimed and was allowed a deduction under sub-section 59(1) of the Income Tax Assessment Act (``the Act'') for the scrapping of this plant. According to the evidence, these extraneous items played no part in the calculation of the share price paid.

3. By deed dated 2 December 1985, the subject property unit trust was created in which the applicant had 100 units of the initial number of 200 units. By a contract dated 2 December 1985, the subject property was sold by the applicant to the subject property unit trust for a


ATC 504

consideration of $2.5 million. The respondent calculated that of this amount, $1,233,327 should be included in the applicant's assessable income as a capital gain.

4. The respondent contended that by virtue of sub-section 160ZZS(1) of the Act, the subject property was deemed to be a post capital gains tax asset. That section and the definitions referred to in sub-section (3) of that section are in the following terms -

``160ZZS(1) For the purposes of the application of this Part in relation to a taxpayer, an asset acquired by the taxpayer on or before 19 September 1985 shall be deemed to have been acquired by the taxpayer after that date unless the Commissioner is satisfied, or considers it reasonable to assume, that, at all times after that date when the asset was held by the taxpayer, majority underlying interests in the asset were held by natural persons who, immediately before 20 September 1985, held majority underlying interests in the asset.

160ZZS(2) For the purposes of this section, where, by reason of the death of a person, a natural person acquires a percentage (in this subsection referred to as the `acquired percentage') of the underlying interests in an asset, the natural person shall be deemed to have held (in addition to any other part of the total underlying interests that the person held or is deemed to have held), at any time when the deceased person held a percentage (in this subsection referred to as the `deceased person's percentage') of the total underlying interests in the property, a percentage of the total underlying interests in the property equal to the acquired percentage, or the deceased person's percentage at that time, whichever is the less.

160ZZS(3) In this section, `majority underlying interests' and `underlying interest', in relation to an asset, have the same meanings as those expressions have in relation to property in Subdivision G of Division 3 of Part III.

...

82KZC(1) In this Subdivision, unless the contrary intention appears -

  • ...
  • `majority underlying interests', in relation to property, means more than one-half of -
    • (a) the beneficial interests held by natural persons (whether directly or through one or more interposed companies, partnerships or trusts) in the property; and
    • (b) the beneficial interests held by natural persons (whether directly or through one or more interposed companies, partnerships or trusts) in any income that may be derived from the property;
  • ...
  • `underlying interest', in relation to property, means a beneficial interest held by a natural person (whether directly or through one or more interposed companies, partnerships or trusts) in the property or in any income that may be derived from the property;''

5. It will be noted that s 160ZZS is silent as to the date on which the property is deemed to be acquired and is silent as to the value at which it is to be taken in. The former is important for indexation purposes. The latter is important for calculating the extent of any profit for capital gain purposes if the property is later sold. In Income Tax Ruling 2340, the Commissioner has purported to fill the gap in the legislation by ruling that the date of acquisition is to be deemed to be the date on which the continuity of benefit of ownership of more than 50 per cent ceases to be maintained, and by ruling that the cost base for determining future capital gain on realisation of the property is to be the market value of the property on the date on which the property is deemed to have been acquired.

6. The applicant argued firstly that s 160ZZS(1) had no application to the present circumstances because the taxpayer was a company and secondly, that in any event, the market value of the property on the date on which the majority of underlying interests changed was $2.5 million and as the subject property was sold for this amount there was no profit to be brought to tax.

7. Accumulated losses of the applicant had been denied by the respondent on the grounds of failure to meet the continuing business test


ATC 505

and the question of recoupment of those losses formed part of the applicant's objection. On the hearing of the proceedings before me, that claim by the applicant was abandoned. Alternatively to his reliance upon s 160ZZS, the Commissioner claimed that the same profit of $1,233,327 was assessable under s 25 of the Act, being a profit from the carrying out of a business operation on which the new shareholders had decided to embark when they acquired the shares, namely, to sell the subject property. On the hearing before me, this claim by the respondent was also abandoned. The two issues therefore are firstly whether s 160ZZS has any application to the present circumstances and, if so, how it should be applied as to date of acquisition and cost of acquisition. The second issue relates to the market value to be put upon the subject land at 28 November 1985, if it is accepted that this is the relevant date, and that market value is the relevant acquisition cost criterion to be applied.

8. The applicant submitted that because it was well settled that shareholders could not be said to have any direct interests in the assets of a company, the section therefore had no application in the present circumstances. If any authority be required for the first proposition, it may be found in the judgment of Dixon CJ, Kitto and Taylor JJ in
Charles v FC of T (1954) 10 ATD 328 at 331; (1953-1954) 90 CLR 598 at 609. The result of this submission, if successful, would be that assets acquired by companies prior to September 1985 would always be deemed to be acquired after September 1985 because the Commissioner would be unable to satisfy himself that there was continuity in the majority underlying interests in the asset. In order to overcome the absurdity of this result, it was submitted on behalf of the applicant that in s 160ZZS the word ``taxpayer'' must be read to exclude companies. I cannot accept this submission.

9. The definitions that are adopted make it clear that the normal legal concept of interests in assets has been supplanted by a statutory approach. The definition of ``majority underlying interests'' assumes that interests may be held through one or more interposed companies. The explanatory memorandum introduced with the legislation stated in the text following the explanation of ``majority underlying interests'' that these interests would also include ``beneficial interests in the property of the company that are held indirectly by a shareholder by virtue of the ownership of the shares''. There can be no doubt that the interpretation for which the Commissioner contends was intended by the draftsman. In my view, the use of the definitions, although they were not originally intended specifically for use in conjunction with s 160ZZS, being conceived as an adjunct to the negative gearing provisions, nevertheless, succeeds in triggering the operation of s 160ZZS if there is a change in the majority shareholding of a company. For the purposes of s 160ZZS, if for no other legal purpose, a shareholder is deemed to have an interest in a company's assets.

10. Although the section is wide enough to deem all the applicant's pre-acquired assets to be post-acquired assets (which in itself may bring about an absurd result) I am concerned only with the subject property in the present circumstances and will not, therefore, speculate as to whether the section may have a wider effect on all other assets in a company, whether or not those assets are of a capital nature.

11. I have no difficulty in accepting that the date at which the assets are to be deemed to have been acquired should be regarded as the date on which the majority of shares changed hands. By analogy with the reasoning in
Robertson & Ors v FC of T (1952) 86 CLR 463, it must be assumed that the precipitating event contemplated by the statute (in Robertson's case the death of the deceased) has taken place before the operative part of the statute comes into force. The applicant sought to argue that the value of the subject property may have changed in the course of the day of acquisition, because the new proprietors had better ideas than the old proprietors for the profitable realisation of the subject property. They may well have had those ideas, but in my view this cannot affect the date upon which it must be said that the section becomes operative. There is usually no difficulty in identifying the time and day on which a majority of shares changes hands. In this case formal settlement procedures would have been adopted.

12. I have more difficulty in accepting paragraph 4 of Ruling 2341, namely, that the cost base for the purposes of determining future capital gains and losses on realisations will be the market value of the asset on the date on which the asset is taken to have been acquired


ATC 506

by the application of s 160ZZS. The section itself is completely silent as to cost base. In order to decide this application, it is necessary to arrive at some figure as the deemed cost of acquisition. It is hard to see how the ruling would operate in the case of a company with diverse assets, unless aliquot proportions are adopted and allowances made for assets and liabilities other than those subsequently realised. Fortunately, it is not necessary to decide that in the present case. There were some assets, apart from the subject land, when the applicant company was taken over. These are, however, capable of valuation. The values that they represent could be deducted from the total consideration to arrive at the historical cost of the subject land if one assumed that the cost of shares in a company represented the commercial cost of its assets. The Commissioner, however, has rejected the test of historical cost and has adopted a rule of thumb using current market value. In this case, it is argued by the Commissioner that they are identical. It may not always be so in the future. I do not, however, consider it legally or administratively reasonable to presume that s 160ZZS impliedly refers to the applicant's original acquisition costs or even to the historical acquisition costs of the acquirer of the shares. As the subject property was acquired from the 1920s onwards, the former formula could bring about an absurd result on subsequent realisation. But I am not prepared to accept the ruling as law simply because it exists. I take it to be a suggestion, or submission, by the Commissioner as to the intention of the legislation and a submission that the legislation should be read as if the market value test was explicitly stated. On this basis, I accept it.

13. The section is an anti-avoidance provision designed to obviate an easy escape from capital gains tax. It seems to me that this legislative object would be achieved if, after the word ``acquired'' where secondly appearing in sub-section (1), there were inserted the words ``at then current market value''. It is a dangerous procedure to read words into legislation, particularly at the level of this Tribunal. It is a procedure described by Lord Symonds in
Magor and St Mellons RDC v Newport Corporation (1952) AC 189 at 191 in well known terms, as a ``usurpation of the legislative function under the thin disguise of interpretation''. However there is strong and encouraging authority in
Cooper Brookes (Wollongong) Pty Limited v FC of T 81 ATC 4292; (1981) 35 ALR 151 where the High Court, by a majority of four to one, in effect read words into s 80C(3) of the Act to avoid a drafting oversight and to achieve a result which was consistent with what were perceived to be Parliament's manifest intentions. It was true that this was done to avoid the literal meaning of the words used which would have produced a result that was ``incongruous'' (per Gibbs CJ at ATC 4296; ALR 157), ``contrary to the objects of the Act'' (per Stephen J at ATC 4299; ALR 162) and ``capricious and irrational'' (per Mason and Wilson JJ at ATC 4306; ALR 170). What I propose here is not an avoidance of the literal meaning of the words used but an insertion of a phrase to amplify the meaning of the words used, consistently with the legislative intention manifested in the explanatory note. The adoption of the words should eliminate any unfairness that might have arisen if the historical cost criterion were adopted and at the same time preserve the principle that capital gains should be taxed. Although obviously amendment of the legislation is to be preferred, it seems to me that as I must give the section some meaning in the present proceedings, the meaning I propose is the most appropriate.

14. The question then remains whether the subject land, when sold for $2.5 million on 2 December 1985, was sold for a sum exceeding its current market value at 18 October 1985. The few weeks difference in the dates are not material.

15. After making adjustments, the respondent considered that the current market value was the same as the adjusted cost base, namely $1,266,673. As the property was sold for $2.5 million, he has included in the applicant's assessable income the difference of $1,233,327 pursuant to the terms of sub-section 160ZO(1) of the Act. Evidence was given as to the way in which the various transactions came about.

16. Prior to 1985, the principal shareholder in the applicant had been seeking to sell the subject property for a number of years. It is located between a railway line and the harbour of Provincial City, adjacent to a commercial building owned by the present substantial


ATC 507

proprietors of the applicant. All attempts at a successful sale had been frustrated by requirements of the council. The former proprietor was an older man, fast running out of patience, according to the managing director of the new substantial proprietor, whom I will call Developer One. When the last proposed pre-1985 sale was aborted, discussions took place with Developer One at the former proprietor's house. They discussed the development of the site and the sale of his shares to Developer One. The former proprietor said that he was so disgusted with the treatment he had been receiving, that he was prepared to sell his shares at the same price that he had quoted to the last would-be purchaser. The following day, Developer One went back with his brother and obtained a letter from the proprietor agreeing to sell his shares at that price. As Developer One was later advised that this procedure contravened the Companies Code, that arrangement was rescinded and subsequently a formal takeover offer was made to all shareholders.

17. Before this was implemented, an option was obtained for a period of time during which Developer One had intense discussions with the Town Clerk and an administrator of the council. These discussions were concentrated on overcoming all the objections that the council had previously raised with other would-be purchasers. Developer One gave evidence that his ideas gained acceptance and that council considered that the area would be improved if their former guidelines were revised. He therefore went ahead with the takeover offer.

18. At that time, his company owned the adjoining land and had developed upon it a six-storey block containing four floors of commercial car parking and two floors of fully let office space. Although rather isolated for commercial purposes, it was known that plans were afoot to redevelop the whole of the surrounding area as part of a Bicentennial project which would result in greatly improved facilities and enhanced demand for commercial accommodation.

19. While the takeover was being effected, Developer One also had discussions with a public company concerning a joint venture. Documents were tendered during the course of the hearing showing calculations made by the proposed joint venturer, and the joint venture agreement which both parties had intended to execute. However because the public company itself was taken over by parties with whom Developer One did not wish to be associated, the idea of that joint venture was abandoned. The documents showed, however (and I have no reason not to accept them as bona fide commercial documents), that in calculations of some complexity in putting the joint venture together, the public company developer was prepared to take in the subject property at $2.7 million. The documents showing this do not of course amount to a formal valuation. They do however give an indication of what a company, experienced in this field, having considered all likely contingencies, was prepared to accept as the base cost of land for a joint venture. There was no relationship at all between Developer One or the applicant on the one hand and the public company developer on the other.

20. The development that was anticipated by Developer One was to be realised in three stages. Finance for the venture was to be obtained from a well known public finance company. In order to present the venture to that company, Developer One engaged another well known firm of valuers, to whom I will refer as Valuer Two. The author of this valuation gave evidence on the hearing of the application. On 1 October 1985 a feasibility study was presented to the financiers. Although it did not contain a formal valuation of the land, it is possible to extrapolate Valuer Two's assessment of that value from both the document presented to the financier and the working papers, in the form of a computer spreadsheet, which was also tendered in evidence. The valuation was supported in detail in evidence by the author. A total figure of $2,609,878 for the land was arrived at.

21. Valuer Two considered that at that time, there were no comparable sales in the area that could assist in arriving at a value. The real estate market in Provincial City had been static for some time. He therefore adopted what he described as the residual method of valuation. He took known factors, such as building costs, interest, realistic achievable rentals and acceptable profit. From these, he worked back to the land value figure which I have quoted. Obviously this method of valuation is less than ideal. It cannot be compared with a valuation based on market prices paid for comparable


ATC 508

properties at about the same time as the valuation. Nevertheless, it is strong evidence of a figure which a valuer of high repute regarded as appropriate to put before a finance company, which, to his knowledge, would depend upon his advice. It is true that if any of the assumptions that he made proved to be inaccurate, this could affect the end result. If the cost of borrowing increased substantially, if the rents were not achievable, if there were building delays through weather or union trouble, if there were increases in costs of raw materials, then the front end calculations would be affected, rendering the final residual result for the land different from that originally perceived. Accepting these drawbacks, however, I consider that what was presented to me and to the finance company was a bona fide attempt by a reputable valuer to give a sustainable opinion (inter alia) on the value of the land. That opinion was that it was worth some $2.6 million when viewed as specific to the proposed development which Valuer Two had outlined. I am prepared to accept that this proposed development was the best commercial development available and that it was considerably better than development that had been proposed by all those who had negotiated with the former owner.

22. Shortly after the joint venture arrangements with the first public company were aborted, Developer One had discussions with a second public company through its managing director whom I will call Developer Two. At that time, both of them (through their companies) were partners in a joint development in Sydney. That was legally structured as a unit trust in which each party held 50 per cent of the units. As that Sydney development drew to a close, Developer Two asked Developer One whether he would be interested in another Sydney development. As Developer One had just acquired the applicant company, it was short of funds and was unable to join Developer Two. The second Sydney development did not go ahead, and Developer Two then came back to Developer One to open up negotiations about developing the subject land, which Developer One had then indirectly acquired through the shares.

23. The two companies concerned are completely unrelated. Evidence was given that there has never been any shareholding or officer relationship between them. The second company is in fact a public company. Conscious of his consequent responsibilities Developer Two, with no other development for his company in mind, decided to further the negotiations with Developer One concerning the development of the subject land. There were many discussions held between Developer One and Developer Two. One of the difficult points in their discussions was arriving at a price at which the subject land should be brought into the joint venture. Developer One provided the feasibility study previously done by the other public company and provided material from Valuer Two to which I have referred. Developer One urged that the land should be brought in at $2.7 million and looked to these ``valuations'' to support that contention. Developer One also gave evidence that he relied on his ``own gut feeling''. He is a man who is well experienced in Provincial City and its district, and is very familiar with prices that are, and were, ruling at the time. Ultimately, it was agreed that the land should be brought in at a compromise figure of $2.5 million. There was no rational basis for the calculation, except that it was a compromise between the two men. They decided to adopt a similar structure to the one that had operated in Sydney and, for that purpose, a unit trust was established as the purchasing vehicle. Developer Two was made aware of the price Developer One had paid for the shares in the applicant company.

24. Developer Two gave evidence on the hearing and confirmed the version of events to which Developer One had testified. He agreed that he knew that Developer One had paid approximately $1.6 million for the company which owned the subject land. In his view, this was a very good price and was something on which Developer One was to be congratulated. He did not, however, think that this should govern the price that the joint venture should pay. He said ``we felt comfortable with $2.5 million''. No check valuation was made, but the matter was brought before his board, together with a series of calculations, returns and projections based on this land cost. The directors approved of the proposal, which then went ahead. Speaking of Developer One, he said ``their profit was their business. Our task was to assess our profit based on the price quoted''.


ATC 509

25. After taxation problems arose, a third valuation was commissioned by the applicant from another experienced valuer to whom I will refer as Valuer Three. Inspection of the site was undertaken on 20 April 1989, but the valuation was carried out as at 18 October 1985. Valuer Three made many enquiries of the local council and of the local office of the Valuer-General and went to great trouble to reconstruct events and prospects as at 1985. He too considered that there was no appropriate comparable sales to guide one on the question of value. He knew the Uphill Street site, to which I will later refer, and compared and contrasted that site with the advantages and disadvantages of the subject land. He was influenced by the cost per square metre of other development sites that had been pointed out to him by officers of the Valuer-General's department.

26. A condition of the development approval of the subject land was the acquisition of some small adjoining parcels of land from the State Rail Authority and the Provincial City Council in order to enhance the site. He disregarded the cost per square metre of those lands as, in his view, they did not constitute comparable sales for property of the size, and development of the complexity, that was under consideration. The element of desperation on the part of the builder to acquire the small areas to comply with council's requirements and the element of relief on the part of the vendor public authorities at getting rid of surplus land, complicated an assessment of the actual price paid and made reliance on such a price as primary evidence inappropriate, particularly as there would have been no general market for these small parcels of land.

27. He came to the conclusion that the sale price of $2.5 million to the joint venture was solid evidence to support his assessment arrived at by other means. As events have shown, the quality of accommodation in the developed subject land is superior to the office accommodation in the Uphill Street development, upon which great reliance was placed by the respondent. On the basis that the price of $2.5 million had been freely negotiated, and was therefore evidence of the price paid for the subject land itself, he considered that this was the best evidence of its value. According to Valuer Three, officers of the Valuer-General's Department agreed with his assessment.

28. For the purpose of these proceedings, the respondent commissioned a valuation from another respected valuer, to whom I will refer as Valuer Four. He gave evidence on the hearing of this application. To some extent, he relied on what he saw as a comparable sale in Level Street, but this was not explored in detail. He relied heavily upon a property in Uphill Street in Provincial City which has since been developed partly as a court building and partly for commercial space. Although a direct comparison between the two developments gave comparable land values to that contended for by the applicant for the subject property, Valuer Four discounted the values by three factors. In his view, the fact that the subject land was almost twice the size of the land in Uphill Street, called for a discount of 10 per cent (an arbitrary figure as he agreed). The fact that they had different floor space ratios, called for a further discount of 10 per cent. In his opinion the location of the subject property was inferior to the location in Uphill Street and this required a further discount of 10 per cent from the initial figure. On these assumptions, he arrived at a value of $1.375 million. All these assumptions were contested by evidence from Valuers Two and Three and by documents which were tendered. Through this process there were certainly exposed some gaps in the reasoning adopted by Valuer Four to arrive at the value contended for. Nevertheless, the respondent sought to have the value adopted because it was in line with that paid to the former owners and was in line, on a pro rata basis, with that paid for the two small parcels of land acquired from the State Rail Authority and the Provincial City Council. Against this, the applicant urged upon me a figure of $2.5 million, as this was in line with the initial feasibility study made by the first public company, by Developer One, and by Valuer Two and was supported by the formal valuation of Valuer Three.

29. The proceedings indicate some of the difficulties that may well arise in the administration of s 160ZZS if current market value is to be the criterion adopted for the deemed cost of acquisition. The extent and detail of the evidence concerning value was more appropriate to a land acquisition case than to a case involving capital gains tax.


ATC 510

Nevertheless, it is apparently inevitable that such evidence will be required until such time as the legislation is amended to provide a more suitable administrative guideline if one can be found. Having decided that the section should be read so as to import current market value as the deemed acquisition cost, I am obliged to determine what that market value was as at the date of acquisition of the majority of the shares.

30. Whilst the arguments put forward by the professional valuers on both sides are persuasive, there cannot be any substitute for a price achieved in a genuine arm's length sale of the subject property itself. It was said that this was not the case here as the sale was between the vendor applicant company, in which Developer One was a director, and the purchaser trustee company for the unit trust in which Developer One was also a director. In my view that does not necessarily mean that the transaction was not an arm's length transaction. The commercial reality was that it was a transaction between two hard-headed developers, both of whom were fully aware of the acceptable level of profit that must be achieved before any joint venture was feasible. There was no suggestion of malafides or of any attempt to avoid tax. Indeed the legislation was not in place at the time of these events. It was announced on 19 September 1985 and was not enacted until 23 May 1986. I accept that avoidance of tax played no part whatever in the creation of the unit trust, in the joint directorships of the trustee company and the joint venturers, and in arriving at the land acquisition price. I also accept the oral evidence of both developers that they considered the price arrived at to be the result of a genuine bargain in the market place.

31. The fact that there is a connection between parties will not thereby determine that any transaction between them is not at arm's length. In considering that phrase in s 26AAA, Davies J in
Barnsdall v FC of T 88 ATC 4565 at 4567-4568 said -

``The term `at arm's length' was developed in the law with respect to transactions between persons, one of whom, such as a trustee or solicitor, is in a position of special influence with respect to the other, a beneficiary or client. A classic statement of the principles is found in the speech of Lord O'Hagan in
McPherson v. Watt (1877) 3 App. Cas. 254 at p. 266. See also
Haywood v. Roadknight (1927) V.L.R. 512 at p. 521.

However, such cases are of little assistance in the interpretation of statutes which are concerned with taxation, with financial grants or with other matters of a fiscal nature. The equitable principles are not apposite in the context.

If the term were simply `not at arm's length',
Australian Trade Commission v. W.A. Meat Exports Pty. Ltd. (1987) 75 A.L.R. 287 would apply. At p. 291, Beaumont, Wilcox and Burchett JJ. said that that expression in sec. 4(8) of the Export Market Development Grants Act 1974 (Cth) referred to the circumstance `where one of them has the ability to exert personal influence or control over the other'. Their Honours said that this was the ordinary meaning of the phrase and that it was `evident that the policy of the legislation would seek to exclude payments to such persons...'.

However, sec. 26AAA(4) used the expression `not dealing with each other at arm's length'. That term should not be read as if the words `dealing with' were not present. The Commissioner is required to be satisfied not merely of a connection between a taxpayer and the person to whom the taxpayer transferred, but also of the fact that they were not dealing with each other at arm's length. A finding as to a connection between the parties is simply a step in the course of reasoning and will not be determinative unless it leads to the ultimate conclusion.''

32. In my view the evidence shows that the dealings between Developer One and Developer Two leading to a sale price of $2.5 million were conducted on an arm's length basis, having regard to commercial realities and to no other irrelevant consideration. It is not surprising that the sale price exceeds the acquisition cost by a substantial margin. All this means is that the former proprietor may not have seen the potential of the subject property and sold it through his company at less than market value. That being so, it seems to me that the price at which they arrived, supported as it is by valuations of varying degrees of formality by reputable valuers, should be


ATC 511

preferred as the best evidence of the current market value of the subject property at the time of the takeover. It follows from this that the sale of the property to the unit trust resulted in no profit for capital gains tax purposes.

33. The objection decisions are therefore set aside and the matters are remitted to the respondent with the direction that the amount assessed as income should be reduced to nil and that consequent penalties should be set aside.

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