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Edited version of your private ruling
Authorisation Number: 1012440495776
Ruling
Subject: CGT
CGT - Partnership - Disposal of CGT
Question
Will the capital gain or loss resulting from the sale of a CGT asset be assessable to the partners in accordance with their partnership interests?
Answer
Yes.
This ruling applies for the following periods
2012-13 financial year
2013-14 financial year
The scheme commences on
1 July 2012
Relevant facts and circumstances
The partnership carries on a business.
A CGT asset was purchased.
The purchase was funded by a loan.
The partnership has always treated the CGT asset as being a partnership asset, including all expenses being paid with partnership funds. In addition, all income derived from the CGT asset has been included as partnership income.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 108-5
Reasons for decision
A CGT asset includes any kind of property (section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997)).
There are extremely limited circumstances where the legal and equitable interests are not the same, and that there is sufficient evidence to establish that the equitable interest is different from the legal title. However, if the equitable interest does not follow the legal title, there is some basis for the profit/loss to be distributed on the equitable and not the legal basis. Any capital gain or loss should also be apportioned on the same basis (Taxation Ruling TR 93/32).
Given a consideration of your arrangement as a whole, including the actions of the partnership in the income years after purchase, it is accepted that the individual partners in the partnership hold equitable interests in the CGT asset in accordance with their partnership interests, and the capital gain/loss arising from the sale of the CGT asset should be shared in accordance with these equitable interests.