Edited version of private advice

Authorisation Number: 1051908343332

Date of advice: 9 October 2021

Ruling

Subject: CGT - statutory trustees

Question

Will the disposal of the partnership properties by the Statutory Trustees result in a capital gain?

Answer

No

This ruling applies for the following periods:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Entity A and Entity B are partners.

Property 1 and Property 2 were jointly held by the partners (partnership properties).

Due to a dispute between the partners, one of the partners applied to the relevant court for orders.

These orders were granted on XX November 20XX, pursuant to the relevant Act, appointing C and D joint and several trustees over the partnership properties (Statutory Trustees).

The Court Orders included the following:

•         The Partnership Land vest in and be held by the said trustees upon trust to sell the Partnership Land ... and to stand possessed of the net proceeds of sale

•         The net assets of the Partnership including the proceeds of sale of the Partnership Land, after ... discharge of the debt and ... payment of costs and expenses, be distributed in accordance with the relevant partnership Act.

Legal title to the partnership properties was transferred to the Statutory Trustees on XX November 20XX.

The Statutory Trustees entered into a contract to sell Property 1 on XX April 20XX with settlement occurring XX June 20XX.

The Statutory Trustees entered into a contract to sell Property 2 on XX April 20XX with settlement occurring XX June 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 104-10(1)

Income Tax Assessment Act 1997 paragraph 104-10(3)(a)

Income Tax Assessment Act 1997 subsection 104-10(4)

Income Tax Assessment Act 1997 subsection 116-20(1)

Income Tax Assessment Act 1997 subsection 110-25(2)

Income Tax Assessment Act 1997 subsection 110-55(2)

Reasons for decision

Pursuant to the order made by the relevant court appointing you as Statutory Trustees for the sale of the partnership properties you were empowered to be the proprietors of those properties.

CGT event A1 happened to you when you disposed of the properties (subsection 104-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997)). The time of the event was when you entered into the contract for the disposal of the properties (paragraph 104-10(3)(a) of the ITAA 1997). A capital gain will be made as a result of CGT event A1 happening if the capital proceeds from the event are more than the asset's cost base (subsection 104-10(4) of the ITAA 1997).

Pursuant to subsection 116- 20(1) of the ITAA 1997, the capital proceeds for the event are the total of the money you receive (or are entitled to receive) in respect of the event happening and the market value of any other property you receive (or are entitled to receive) in respect of the event happening.

Under the general cost base and reduced cost base rules covered under subsections 110-25(2) and 110-55(2) of the ITAA 1997, the first element of the cost base and reduced cost base of an asset is the sum of the amount paid (or required to be paid) and the market value of the property given (or required to be given) in respect of acquiring it.

As you undertook an obligation as trustees to pay the net proceeds of the sale to the former owners of the properties (the partners), your payment of the net proceeds to them will be your cost of acquisition ('the money you are required to pay') for the purposes of subsections 110-25(2) and 110-55(2) of the ITAA 1997.

As the proceeds from the sale of the properties will be identical to your cost of acquiring them, there will be no capital gain.