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Ruling
Subject: Investment
Question
Can a capital gains tax (CGT) loss occur in relation share proceeds owed to you, which you have not been able to obtain, in respect to a company takeover?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2012
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You held shares in an ASX (Australian Stock Exchange) listed company, which merged with a company listed overseas and then ceased trading on the ASX.
At a later time, another company took over this company.
Since the takeover, you have tried to recover your funds, but without success, due to identification issues with the relevant overseas companies.
You wish to write off your investment so you can windup your fund.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 100-20
Income Tax Assessment Act 1997 Section 104-1
Income Tax Assessment Act 1997 Section 104-5
Reasons for decision
Section 100-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states:
'You can make a capital gain or loss only if a CGT event happens.'
Section 104-1 of the ITAA 1997 states (about Division 104 of the ITAA 1997):
'This Division sets out all the CGT events for which you can make a capital gain or loss.'
Section 104-5 of the ITAA 1997 provides a summary of the CGT events, from CGT event A1 to CGT event L8. CGT events that are commonly related to shares include:
§ CGT event A1: Disposal of a CGT asset.
§ CGT event E2: Transferring a CGT asset to a trust.
§ CGT event G1: Capital payment for shares.
§ CGT event G3: Liquidator or administrator declares shares or financial instruments worthless.
In your case, there is no CGT event applicable to your circumstances. Therefore, you cannot realise a CGT loss in relation to your entitlement from the takeover of your shares.