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Edited version of private advice
Authorisation Number: 1051908045615
Date of advice: 11 October 2021
Ruling
Subject: CGT - first element - market substitution rule
Question
Will the first element of cost base of the property be market value at the time of acquisition in accordance with paragraph 112-20(1)(c) of the Income Tax Assessment Act 1997?
Answer
Yes. Having considered your circumstances and the relevant factors, it is accepted that you did not deal at arm's length with the other entity in connection with the acquisition of the property. As a result, the market value substitution rule will apply to change the first element of your cost base or reduced cost base of the property to the market value at the time the asset was acquired. Further information on capital proceeds can be found by searching QC 64895 on ato.gov.au.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
Your parents owned a property (the property).
You purchased the property from your parents for substantially less than market value.
A report was conducted to identify the market value of the property (at the time of acquisition).
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 100-25
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 108-5
Income Tax Assessment Act 1997 Section 110-55
Income Tax Assessment Act 1997 Division 112
Income Tax Assessment Act 1997 Paragraph 112-20(1)(c)
Income Tax Assessment Act 1997 Subsection 995-1(1)