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Edited version of your written advice
Authorisation Number: 1012898444174
Date of advice: 21 October 2015
Ruling
Subject: Company losses - continuity of ownership test
Question
Will the transfer of a share on the death of the shareholder to the trustee of the person's estate cause you to fail the ownership conditions in Division 165 of the Income Tax assessment Act 1997 (ITAA 1997)?
Answer
No
This ruling applies for the following period
Year ended 30 June 2015
The scheme commenced on
1 July 2014
Relevant facts
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The company ceased all operations in the relevant income year. Attempts to sell the business failed. The buildings, and plant and equipment were sold in the relevant income year.
The sale funds were placed in a company bank account and earned interest.
The company had two shareholders, who owned one, $1 share each. The company during its period of operation incurred substantial losses.
One of the shareholders passed away in the 20XX year.
Your understanding is that the deceased estate is still in administration.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 165-165
Income Tax Assessment Act 1997 Section 165-205
Income Tax Assessment Act 1997 paragraph 165-205(a)
Reasons for decision
For the purposes of the ownership conditions in Division 165 of the ITAA 1997, as long as the shares in the company continue to be owned beneficially by the trustee of the person's estate, those shares will be taken to continue to be owned beneficially by the deceased, pursuant to paragraph 165-205(a) of the ITAA 1997.
Under State and Territory laws governing the succession of property, title in the property of a deceased vests automatically in the executor of the deceased's estate , or it vests in the court appointed administrator of the deceased's estate with effect from the date of the deceased's death. The trustee of a person's estate owns property in that capacity until administration of the estate is completed.
In this case, at this point in time, the share owned by the deceased will be beneficially held by the trustee of the estate. Therefore, the company meets the ownership test and is entitled to claim the carry forward losses.