Edited version of your written advice

Authorisation Number: 1012745663127

Ruling

Subject: Limited recourse borrowing arrangements

Question 1

Assuming a limited recourse borrowing arrangement (LRBA) as originally established does not give rise to non-arm's length income, if a self-managed superannuation fund (the Fund) refinances the loan for the LRBA with a loan from a related trust on the terms of the Draft Loan Agreement, will the income from the LRBA be non-arm's length income of the Fund in accordance with section 295-550 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes, ordinary income or statutory income derived by the Fund as the beneficiary of the holding trust which holds the asset acquired for the benefit of the Fund (the Holding Trust) derived by the Fund after that refinancing occurs will be non-arm's length income of the Fund in accordance with subsection 295-550(5) of the ITAA 1997.

Question 2

If the answer to Question 1 is 'yes' (the income received will be non-arm's length income), would the income received by the Fund from the LRBA be non-arms' length income of the Fund in accordance with section 295-550 of the ITAA 1997 if the Loan Agreement for the refinanced loan also provided for:

I. monthly principal repayments to be made?

II. personal guarantees were required to support the loan?

III. both monthly principal repayments to be made and personal guarantees were required to support the loan?

Answer

Yes, ordinary income or statutory income derived by the Fund as the beneficiary of the Holding Trust will be non-arm's length income of the Fund in accordance with subsection 295-550(5) of the ITAA 1997 if:

• the limited recourse borrowing is refinanced in the way described in 'Relevant facts and circumstances' of this ruling;

• the Draft Loan Agreement for the refinancing also provides for the matters set out in (i), (ii) or (iii) in Question 2; and

• the ordinary or statutory income is derived by the Fund after that refinancing occurs.

Question 3

Will the income derived by the Fund under the LRBA described in this ruling be non-arm's length income of the Fund pursuant to section 295-550 of the ITAA 1997?

Answer

The answer to Question 1 also answers this question.

This ruling applies for the following period:

Income year ending 30 June 2015

The scheme commences on:

The specified scheme in relation to which this ruling has been applied for has not yet commenced, but it is contemplated that it will commence at some time in the relevant income year.

Relevant facts and circumstances

The Fund is a complying superannuation fund.

The Trustee of the Fund (the Fund Trustee) is a corporate entity.

The Fund has only two members (Member 1) and (Member 2) who are also directors and shareholders of the Fund Trustee.

A few years ago, the Fund Trustee borrowed money from a related Trust, (the Existing Lender), to acquire a commercial property (the Asset) for the benefit of the Fund under an LRBA on terms which are consistent with section 67A of the Superannuation Industry (Supervision) Act 1993 (SISA).

Member 1 and Member 2 are the directors and shareholders of the trustee of the Existing Lender.

The Asset was purchased from a related party of the Fund.

The Asset is held on trust for the Fund Trustee by the Holding Trust.

The trustee of the Holding Trust (the Holding Trust Trustee) is a private company.

Member 1 and Member 2 are the directors and shareholders of the Holding Trust Trustee.

The Holding Trust Deed provides that:

• The Holding Trust Trustee will hold the asset as bare trustee for the Fund on the terms and conditions of the deed;

• On the purchase of the asset by the Holding Trust Trustee, the Fund has a beneficial interest in the asset that is vested and indefeasible as against the Holding Trust Trustee;

• the Fund is presently entitled to all income arising from the asset;

• the Fund may direct the Holding Trust Trustee to transfer legal ownership of the asset to the Fund on the Fund making one or more payments of the loan amount in accordance with or as otherwise required by paragraph 67A(1)(c) of SISA without further consideration; and

• Asset means any asset agreed from time to time between the Holding Trust Trustee and the Fund if and as permitted under sections 67A and 67B of the SISA.

The Holding Trust Trustee derives rental income in respect of the Asset.

The terms of the loan (the Existing Loan) provided for:

• the borrowing of a specified amount;

• instalments of the loan amount as and when required by the Lender;

• payment of interest at 7.89% per annum fixed for five years, or such other rate as may be agreed from time to time between the Lender and the Fund;

• interest payable monthly in arrears; and

• no specific repayment date.

The ruling application states that Member 1 and Member 2 have certain estate planning goals they wish to achieve. These goals cannot be achieved under the current arrangements, as the one entity is both the owner of the relevant property and the Existing Lender. These goals can be achieved by having the Fund repay the Existing Loan with the proceeds from a new loan from a newly established entity.

Member 1 and Member 2 have established a new trust for that purpose. The trustee of that trust is a corporate entity (the New Lender).

Member 1 and Member 2 are the directors and shareholders of the New Lender.

To enable the New Lender to refinance the Existing Loan, Member 1 and Member 2 intend to gift money to the New Lender either personally or from other entities they control.

Once the New Lender has sufficient cash resources, Member 1 and Member 2 plan for the Fund to refinance the amount outstanding to the Existing Lender with a new loan (New Loan) from the New Lender. The Existing Loan from the Existing Lender will be repaid in full from the advance made by the New Lender to the Fund.

The terms of the New Loan, as set out in the Draft Loan Agreement between the New Lender and the Fund Trustee, include the following key features:

• the repayment date is 10 years from the Advance Date;

• the Advance Date is the date on which the Advance is made at the request of the Borrower;

• the Borrower is not required to make any repayments until the repayment date but may repay the outstanding amount or any part of it at any time; and

• the interest rate is 0% per annum (or such other rate as the parties agree).

The Draft Loan Agreement also contains in its Schedules a draft mortgage proposed to be given in favour of the New Lender in respect of the Asset.

No personal guarantees or other security (apart from the mortgage referred to above) are proposed to be given to the New Lender in relation to repayment under the Draft Loan Agreement.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 273

Income Tax Assessment Act 1997 Division 295

Income Tax Assessment Act 1997 Section 295-545

Income Tax Assessment Act 1997 Section 295-550

Income Tax Assessment Act 1997 Subsection 295-550(4)

Income Tax Assessment Act 1997 Subsection 295-550(5)

Income Tax Assessment Act 1997 Paragraph 295-550(5)(a)

Income Tax Assessment Act 1997 Paragraph 295-550(5)(b)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Rates Act 1986 Section 26

Income Tax Rates Act 1986 Section 35

Taxation Administration Act 1953 Section 359-5

Taxation Administration Act 1953 Section 359-35

Reasons for decision

Summary

Ordinary income or statutory income derived by the Fund as the beneficiary of the Holding Trust will be non-arm's length income of the Fund in accordance with subsection 295-550(5) of the ITAA 1997 if:

• the limited recourse borrowing is refinanced in the way described in the 'Relevant facts and circumstances'; and

• the ordinary or statutory income is derived by the Fund after that refinancing occurs.

The answer to Question 2 is essentially the same as Question 1 if the Draft Loan Agreement for the refinancing also provides for the matters set out in (i), (ii) or (iii) in Question 2.

The answer to Question 1 also answers Question 3.

Question 1

Detailed reasoning

Section 295-545 of the ITAA 1997 provides that the taxable income of a complying superannuation fund is split into a non-arm's length component and a low tax rate component. The note to subsection 295-545(1) explains that a concessional rate of tax applies to the low tax component of a complying superannuation fund's taxable income, while the non-arm's length component is taxed at the highest marginal rate. These rates are set out in the Income Tax Rates Act 1986 and are 15% and 47% respectively for the 2014-15 income year (see sections 26 and 35 of that Act).

According to subsection 995-1(1) of the ITAA 1997, the phrase 'non-arm's length component' has the meaning given by section 295-545 of the ITAA 1997. Subsection 295-545(2) of the ITAA 1997 provides that the non-arm's length component for an income year is the entity's non-arm's length income for that year less any deductions to the extent that they are attributable to that income.

According to subsection 995-1(1) of the ITAA 1997, the phrase 'non-arm's length income' has the meaning given by section 295-550 of the ITAA 1997.

There are various subsections in section 295-550 of the ITAA 1997 under which amounts of ordinary income or statutory income of a complying superannuation fund are non-arm's length income of that fund. Subsections 295-550(4) and (5) of the ITAA 1997 specifically apply to such amounts derived by an entity as a beneficiary of a trust.

Subsection 295-550(4) of the ITAA 1997 provides that income derived by the entity as a beneficiary of a trust, other than because of holding a fixed entitlement to the income, is non-arm's length income of the entity.

Subsection 295-550(5) of the ITAA 1997 states:

Other income *derived by the entity as a beneficiary of a trust through holding a fixed entitlement to the income of the trust is non-arm's length income of the entity if:

(a) the entity acquired the entitlement under a *scheme, or the income was derived under a scheme, the parties to which were not dealing with each other at *arm's length; and

(b) the amount of the income is more than the amount that the entity might have been expected to derive if those parties had been dealing with each other at arm's length.

Income derived as a beneficiary of a trust

Subsections 295-550(4) and (5) of the ITAA 1997 are relevant to the present case in relation to amounts of ordinary or statutory income included in the assessable income of the Fund that are sourced from the Fund Trustee's entitlement as the beneficiary of the Holding Trust.

Such amounts are, for the purposes of those subsections, 'income derived by the [Fund] as a beneficiary of a trust': Allen v Federal Commissioner of Taxation (2011) 195 FCR 416; SSCASP Holdings Pty Ltd v Federal Commissioner of Taxation (2013) 211 FCR 332.

Fixed entitlement to income derived as a beneficiary of a trust

Taxation Ruling TR 2006/7 Income tax: special income derived by a complying superannuation fund, complying approved deposit fund or pooled superannuation trust in relation to a year of income (TR 2006/7) explains what amounts are considered to be 'special income' under former section 273 of the Income Tax Assessment Act 1936 (ITAA 1936) which was repealed with effect from 1 July 2007.

Although that ruling is primarily concerned with former section 273 of the ITAA 1936, it is also taken to be a ruling about section 295-550 of the ITAA 1997 to the extent that it addresses issues in section 295-550 that are the same as were in former section 273: see paragraphs 1A and 1C of that ruling, and section 357-85 in Schedule 1 to the Taxation Administration Act 1953 (TAA) which provides that a ruling about a relevant provision (the 'old' provision) that is re-enacted or remade (the 'new' provision) is taken also to be a ruling about the new provision in so far as the new provision expresses the same idea as the old provision.

In paragraph 102 of TR 2006/7, the Commissioner sets out his view that a complying superannuation fund has a fixed entitlement to a trust distribution:

… if the entity's entitlement to the distribution does not depend upon the exercise of the trustee's or any other person's discretion.

The Commissioner has confirmed in his decision impact statement for The Trustee for the MH Ghali Superannuation Fund and Commissioner of Taxation [2012] AATA 527 that he will continue to apply the view expressed in paragraph 102 of TR 2006/7 for the purposes of subsections 295-550(4) and (5) of the ITAA 1997.

After considering the terms of the Holding Trust Trust Deed, including in particular the clauses outlined in paragraph 10 of the 'Relevant facts and circumstances', it is clear that the Fund's entitlement to the income of the Holding Trust as the beneficiary of that trust does not depend upon the exercise of the Holding Trust Trustee's, or any other person's, discretion. Accordingly, it is the Commissioner's view that the Fund derives ordinary or statutory income as a beneficiary of the Holding Trust through the holding of a fixed entitlement to the income of that trust.

Therefore, it is subsection 295-550(5), rather than subsection 295-550(4), of the ITAA 1997 that is to be considered further in the present case. If that view is wrong, and the Fund derives income as a beneficiary of the Holding Trust, other than because of holding a fixed entitlement to the income of that trust, then that income is non-arm's length income of the Fund pursuant to subsection 295-550(4) of the ITAA 1997.

Scheme

Under subsection 295-550(5) of the ITAA 1997 there must be a scheme under which the Fund acquired its fixed entitlement to the income of a trust, or under which an amount or amounts of ordinary or statutory income derived by the Fund as a beneficiary of a trust was or were so derived. The term 'scheme' is defined in subsection 995-1(1) of the ITAA 1997 to mean:

(a) any *arrangement; or

(b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

The term 'arrangement' is also defined in subsection 995-1(1) of the ITAA 1997 to mean:

any arrangement, agreement, understanding, promise or undertaking, whether expressed or implied, and whether or not enforceable (or intended to be enforceable) by legal proceedings.

The Full Federal Court in Allen v Federal Commissioner of Taxation (2011) 195 FCR 416 considered the term 'arrangement' as defined for the purposes of former subsection 273(7) of the ITAA 1936 - the immediate predecessor of subsection 295-550(5) of the ITAA 1997. That term was defined in the ITAA 1936 in terms almost identical to a combination of the definitions of 'scheme' and 'arrangement' in the ITAA 1997. The court held, at 433-434, that the series of steps undertaken by Mr Allen in directing the trustees of several trusts (including the superannuation fund) led to the results that the superannuation fund received both a fixed interest in the relevant trust estate and the relevant distribution of income from that trust estate. The court also held that each result (that is, the fund's acquisition of its interest in the relevant trust estate and its derivation of income as a beneficiary of that trust) were readily seen to be the consequence of an 'arrangement' to which the various trustees were parties. Further, the court said that was "clearly so, given that the creation of the structure and the flow of funds was orchestrated in conformity with the legal advice obtained by the taxpayers".

The Full Federal Court's approach shows that, for the purposes of subsection 295-550(5) of the ITAA 1997, the scheme referred to in that subsection may be identified as including the circumstances under which the Fund:

• acquired its fixed entitlement to the income of a trust; and/or

• derived an amount or amounts of ordinary or statutory income as a beneficiary of the trust through holding that entitlement.

Similarly, for the purposes of applying subsection 295-550(5) of the ITAA 1997 in the present case, the scheme referred to in that subsection may be identified as involving the series of steps undertaken to give effect to the LRBA in conformity with the requirements of section 67A of the SISA. The scheme includes the establishment and operation of the Existing Loan and the Holding Trust. Those steps resulted in the Fund acquiring its entitlement to the income of the Holding Trust through which entitlement the Fund derived ordinary or statutory income as the beneficiary of that trust.

The scheme referred to in subsection 295-550(5) of the ITAA 1997 also includes the series of steps, undertaken to give effect to refinancing the Existing Loan in conformity with the requirements of section 67A of the SISA, in which the Existing Loan (which provided the money used for the acquisition of the asset) is to be brought to an end and substituted by the New Loan which is to be secured by a mortgage over the same asset. The scheme includes the establishment and operation of the New Loan by the New Lender as the Fund will only have a right to acquire legal ownership of the asset acquired with the borrowed money in conformity with section 67A of the SISA by making one or more payments to repay the New Loan. Consequently, the refinancing is part of a scheme under which the Fund maintains its entitlement to the income of the Holding Trust and so derives ordinary or statutory income as the beneficiary of that trust. Those results are readily seen to be the consequences of the scheme.

As such, it is readily concluded that, for the purposes of paragraph 295-550(5)(a) of the ITAA 1997, the ordinary or statutory income derived by the Fund as beneficiary of the Holding Trust through holding its fixed entitlement to the income of that trust is so derived under a scheme.

Parties to scheme not dealing at arm's length

The Commissioner considers that in the present case the parties are not dealing with each other at arm's length in relation to the scheme.

The definition of 'arm's length' in subsection 995-1(1) of the ITAA 1997 provides that in determining whether parties deal at arm's length, consider any connection between them and any other relevant circumstances.

In Federal Commissioner of Taxation v AXA Asia Pacific Holdings Ltd (2010) 189 FCR 204 at 213 (AXA) Dowsett J summarised propositions which emerge from the numerous cases in which the expression 'not dealing with each other at arm's length' or similar expressions have been considered, as follows:

• in determining whether parties have dealt with each other at arm's length in a particular transaction, one may have regard to the relationship between them;

• one must also examine the circumstances of the transaction and the context in which it occurred;

• one should do so with a view to determining whether or not the parties have conducted the transaction in a way which one would expect of parties dealing at arm's length in such a transaction;

• relevant factors which may emerge include existing mutual duties, liabilities, obligations, cross-ownership of assets, or identity of interests which might enable either party to influence or control the other, or induce either party to serve a common interest and so modify the terms on which strangers would deal;

• where the parties are not in an arm's length relationship, one may infer that they did not deal with each other at arm's length, and that the resultant transaction is not at arm's length;

• however related parties may, in some circumstances, so conduct a dealing as to displace any inference based on the relationship;

• unrelated parties may, on occasions, deal with each other in such a way that the resultant transaction may not properly be considered to be at arm's length.

In that case Edmonds and Gordon JJ, who did not disapprove of Dowsett J's summary of those propositions, further stated at 231 that:

Any assessment of whether parties were dealing at arm's length involves 'an assessment [of] whether in respect of that dealing they dealt with each other as arm's length parties would normally do, so that the outcome of their dealing is a matter of real bargaining' …

Further, the Full Federal Court in Allen v Federal Commissioner of Taxation (2011) 195 FCR 416 at 434 held that former paragraph 273(7)(a) of the ITAA 1936 - the immediate predecessor of paragraph 295-550(5)(a) of the ITAA 1997 - does not require that the 'dealing' consist only of the actual derivation of the income in question by 'the entity', but that the evident legislative intention of the provisions is to permit regard to be had to the totality of the steps that result in the entity's acquisition of its fixed entitlement to income as beneficiary of a trust and any derivation of ordinary or statutory income by the entity through holding that entitlement.

In this case, that means that regard may be had to, amongst other things, the establishment and operation of the New Loan in conformity with section 67A of the SISA which requires the asset acquired with the money borrowed under the Existing Loan to continue to be held in the Holding Trust of which the Fund is the beneficiary.

It is clear that the parties in this case are not in an arm's length relationship. This is because Member 1 and Member 2 are:

• the only members of the Fund (the borrower);

• the directors and shareholders of the Fund Trustee;

• the directors and shareholders of the Holding Trust Trustee;

• the directors and shareholders of the Existing Lender; and

• the directors and shareholders of the New Lender.

Assessing the circumstances holistically, the Commissioner considers that the parties are not dealing with each other in relation to the scheme as arm's length parties would do. Aspects which, taken together, the Commissioner considers lead to that conclusion include:

• the New Lender will not by way of charging interest under the New Loan, or by any other means, be compensated for the opportunity cost in lending the principal to the Fund Trustee for the substantial period of 10 years or for the additional risk assumed in relation to recovery of the principal in the event of the borrower's default under a loan given the limited recourse nature of the loan;

• rather than regular periodic repayments of the principal sum, only a single lump sum repayment is required to be made on the tenth anniversary of any advance made under the New Loan; and

• the New Lender does not propose to seek personal guarantees from the members of the Fund as security for the borrower's performance under the New Loan.

The Commissioner considers that the requirements of paragraph 295-550(5)(a) of the ITAA 1997 are therefore, satisfied.

Amount of income greater than might be expected if dealing at arm's length

The final requirement of subsection 295-550(5) of the ITAA 1997, which is set out in paragraph 295-550(5)(b) of the ITAA 1997, is that the amount of the ordinary or statutory income (derived by the entity as a beneficiary of a trust through holding a fixed entitlement to the income of the trust) is more than the amount that the entity might have been expected to derive if the parties had been dealing with each other at arm's length.

The Full Federal Court in Allen v Federal Commissioner of Taxation (2011) 195 FCR 416 at 429 observed, in relation to former paragraph 273(7)(b) of the ITAA 1936 - the immediate predecessor of paragraph 295-550(5)(b) of the ITAA 1997 - that this requires a comparison between a hypothetical arm's length dealing and what actually occurred. The Court also explained at the same page that the 'hypothetical situation' that the 'actual dealing' is to be compared with is that which "might have been expected to apply if the parties to the arrangement had been dealing at arm's length."

If the parties to the scheme in this case were dealing with each other at arm's length, the amount of ordinary or statutory income the Fund might be expected to derive as beneficiary of the Holding Trust is nil. It might be expected that an arm's length lender on being approached to refinance the Existing Loan would not lend any capital on the terms of the New Loan that form part of the scheme such that there would be no continuing investment in the Asset through the Holding Trust under the scheme and therefore no ordinary or statutory income might be expected to be derived by the Fund as beneficiary of the Holding Trust.

It is no answer to this conclusion to say, that the Fund could have refinanced the loan from an arm's length lender on different terms, or that the Fund could have used other means by which to acquire the Asset, as that is not the scheme for the purposes of subsection 295-550(5) of the ITAA 1997 in this case. The comparison contemplated by paragraph 295-550(5)(b) of the ITAA 1997, as explained by the Full Federal Court in Allen v Federal Commissioner of Taxation (2011) 195 FCR 416, is made between what actually occurred as part of the scheme and what might be expected to have occurred if the parties to that scheme had been dealing with each other at arm's length in relation to that scheme.

The Commissioner considers that the final requirement of subsection 295-550(5) of the ITAA 1997 is satisfied.

In conclusion, if the limited recourse borrowing is refinanced in the way described in this ruling, then any ordinary or statutory income derived by the Fund as beneficiary of the Holding Trust after the refinancing will be non-arm's length income of the Fund pursuant to section 295-550 of the ITAA 1997.

Question 2

Detailed reasoning

Question 2 essentially asks whether the Commissioner would reach a different conclusion from that expressed for Question 1 if the Draft Loan Agreement for the refinancing also provided for the matters set out in (i), (ii) or (iii) in Question 2.

If the Draft Loan Agreement for the refinancing also provided for the matter set out in (i) in Question 2, the Commissioner still considers that after assessing the circumstances holistically, that the parties would not be dealing with each other in relation to the scheme as arm's length parties would do. Aspects which, taken together, the Commissioner considers lead to that conclusion include:

• the New Lender will not by way of charging interest under the New Loan, or by any other means, be compensated for the opportunity cost in lending the principal to the Fund Trustee for the substantial period of 10 years or for the additional risk assumed in relation to recovery of the principal in the event of the borrower's default under a loan given the limited recourse nature of the loans; and

• the New Lender does not propose to seek personal guarantees from the members of the Fund as security for the borrower's performance under the New Loan.

If the Draft Loan Agreement for the refinancing also provided for the matter set out in (ii) in Question 2 (but not the matter set out in (i) in Question 2), the Commissioner still considers that after assessing the circumstances holistically, that the parties would not be dealing with each other in relation to the scheme as arm's length parties would do. Aspects which, taken together, the Commissioner considers lead to that conclusion include:

• the New Lender will not by way of charging interest under the New Loan, or by any other means, be compensated for the opportunity cost in lending the principal to the Fund Trustee for the substantial period of 10 years or for the additional risk assumed in relation to recovery of the principal in the event of the borrower's default under a loan given the limited recourse nature of the loans; and

• rather than regular periodic repayments of the principal sum, only a single lump sum repayment is required to be made on the tenth anniversary of any advance made under the New Loan.

If the Draft Loan Agreement for the refinancing also provided for the matters set out in (iii) in Question 2 (that is, both the matters set out in (i) and (ii) in Question 2), the Commissioner still considers that after assessing the circumstances holistically, the parties would not be dealing with each other in relation to the scheme as arm's length parties would do. Aspects which, taken together, the Commissioner considers lead to that conclusion include the fact that the New Lender will not by way of charging interest under the New Loan, or by any other means, be compensated for the opportunity cost in lending the principal to the Fund Trustee for the substantial period of 10 years or for the additional risk assumed in relation to recovery of the principal in the event of the borrower's default under a loan given the limited recourse nature of the loans.

In other words, the Commissioner would not reach a different conclusion from that expressed for Question 1 if the Draft Loan Agreement for the refinancing also provided for the matters set out in (i), (ii) or (iii) in Question 2.

Question 3

Detailed reasoning

In accordance with subsection 359-5(1) of Schedule 1 to the TAA, the Commissioner may, on application, make a written ruling (called a private ruling) on how the Commissioner considers a relevant provision applies, or would apply, to a particular taxpayer in relation to a specified scheme.

Subsection 359-35(1) of Schedule 1 to the TAA generally requires the Commissioner to comply with an application for a private ruling and make the ruling. However, in the interests of allowing the Commissioner to focus efforts on increasing certainty for entities in the most genuine and worthy cases and in recognition that the Commissioner is not in the business of giving advice as a purely academic exercise, the Commissioner may decline to rule in accordance with subsections 395-35(2) and (3) of Schedule 1 to the TAA.

Under paragraph 359-35(2)(b) of Schedule 1 to the TAA, the Commissioner may decline to make a private ruling if the matter sought to be ruled on, is already being, or has been, considered by the Commissioner for you.

The Commissioner has previously indicated that he did not consider that Questions 1 and 3 deal with different schemes. Correspondence provided by you merely stated that the Commissioner should "answer the questions based on the facts contained in the previous material based on the draft loan agreement".

The Commissioner is of the view that Question 3 as you have posed it, has been ruled on, as provided in the answer to Question 1 detailed above.