Edited version of private advice

Authorisation Number: 1052285029581

Date of advice: 23 September 2024

Ruling

Subject: Trustee in bankruptcy

This ruling applies for the following periods:

30 June 20XX

30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

During December XXXX, the Bankrupt and Taxpayer A purchased, as tenants in common, the Property.

From the time of its purchase, the Property was the family home and principal place of residence of Taxpayer A. The Bankrupt lived predominantly in a foreign jurisdiction, rather than in the Property, due to business travels and business needs. Whenever the Bankrupt returned to Australia, they resided in the Property. Prior to the Covid-19 pandemic the Bankrupt would stay in the Property for up to about 6 weeks per year. Since the Covid-19 pandemic and the Bankrupt's bankruptcy, the Bankrupt has not returned to Australia and consequently has not resided at the Property. Taxpayer A and the Bankrupt are married although living apart.

On XX July 20XX, a court of a foreign jurisdiction declared the Bankrupt, bankrupt.

The Bankrupt is not an Australian citizen or permanent resident of Australia. The Bankrupt's nationality is of a foreign jurisdiction and they are a resident of a foreign jurisdiction. The Bankrupt used to travel to Australia generally on business visas.

On XX October 20XX, at a general meeting of creditors, Bankruptcy Trustees were appointed joint and several trustees of the bankrupt estate of the Bankrupt.

On XX December 20XX, the Bankruptcy Trustees lodged a Bankruptcy Application with the NSW Land and Registry Services for transmission of the Bankrupt's interest in the Property to them.

On XX January 20XX, the Bankruptcy Trustees became registered on the title of the Property in respect of the Bankrupt's interest in the Property and became the co-owners of the Property with Taxpayer A, as tenants in common, in equal shares.

By Summons, the Bankruptcy Trustees sought inter alia orders appointing Sale Trustees as statutory trustees for sale of the Property pursuant to the Conveyancing Act 1919 (NSW).

On XX November 20XX the Sale Trustees were appointed as statutory trustees for sale of the Property. An order was made that the Property be vested in the Sale Trustees on the statutory trust for sale under the Conveyancing Act 1919 (NSW). By operation of law, the vesting order in the XX November 20XX Orders divested each of taxpayer A and the Bankruptcy Trustees/the Bankrupt of their beneficial interests in the Property; and following the making of the XX November 20XX orders neither Taxpayer A nor the Bankruptcy Trustees/the Bankrupt had a beneficial interest in the Property and that instead their rights were transformed into the right to see the statutory trust for sale performed and to a share of the net proceeds of sale in accordance with their beneficial interests and subject to an accounting in equity.

On XX May 20XX, the Sale Trustees became registered proprietors of the Property in accordance with the Real Property Act 1900 (NSW).

On XX April 20XX, the Sale Trustees, as vendors, and Taxpayer A, as purchaser, exchanged contracts for the sale of the Property for the sale price of $XX.

Settlement of the sale of the Property to Taxpayer A has been delayed to allow the parties to obtain private rulings from the Commissioner in respect of the Capital Gains Tax implications as a result of the appointment of the Sale Trustees and the Property vesting in them, and the subsequent sale of the Property by them to Taxpayer A.

Relevant legislative provisions

Section 6 of the Income Tax Assessment Act 1936

Section 254 of the Income Tax Assessment Act 1936

Section 104-10 of the Income Tax Assessment Act 1997

Section 104-55 of the Income Tax Assessment Act 1997

Section 106-30 of the Income Tax Assessment Act 1997

Section 110-25 of the Income Tax Assessment Act 1997

Section 110-55 of the Income Tax Assessment Act 1997

Section 115-210 of the Income Tax Assessment Act 1997

Section 116-20 of the Income Tax Assessment Act 1997

Section 14-200 of Schedule 1 to the Taxation Administration Act 1953

Section 14-215 of Schedule 1 to the Taxation Administration Act 1953

Does IVA apply to this private ruling?

Part IVA of the Income Tax Assessment Act 1936 contains anti-avoidance rules that can apply in certain circumstances where you or another taxpayer obtains a tax benefit, imputation benefit or diverted profits tax benefit in connection with an arrangement.

If Part IVA applies, the tax benefit or imputation benefit can be cancelled (for example, by disallowing a deduction that was otherwise allowable) or you or another taxpayer could be liable to the diverted profits tax.

We have not fully considered the application of Part IVA to the arrangement you asked us to rule on, or to an associated or wider arrangement of which that arrangement is part.

If you want us to rule on whether Part IVA applies, we will need to obtain and consider all the facts about the arrangement which are relevant to determining whether Part IVA may apply.

For more information on Part IVA, go to our website ato.gov.au and enter 'part iva general' in the search box on the top right of the page, then select 'Part IVA: the general anti-avoidance rule for income tax'.

Question 1

Pursuant to section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997), did a CGT event A1 occur on XX November 20XX when the Property vested in the Sale Trustees in accordance with the XX November 20XX Orders?

Answer 1

Yes

Detailed reasoning

Section 104-10 of the ITAA 1997 provides:

(1) CGT event A1 happens if you dispose of a CGT asset.

(2) You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner.

(3) The time of the event is:

(a) when you enter into the contract for the disposal; or

(b) if there is no contract--when the change of ownership occurs.

(4) You make a capital gain if the capital proceeds from the disposal are more than the asset's cost base. You make a capital loss if those capital proceeds are less than the asset's reduced cost base.

The Sale Trustees were appointed consistent with the orders of a court on XX November 20XX. They were appointed in their capacity as Trustee for the sale of the Property because of the operation of law.

ATO ID 2009/129 Income Tax: Capital gains tax: land vested in a statutory trustee for sale, CGT event A1 or CGT event E1? (ATO ID 2009/129) states that the making of a court order effects a disposal of property from the previous owners to the trustees for sale by operation of the law.

The court orders resulted in CGT event A1 occurring to the Bankrupt and Taxpayer A. Accordingly, the Sale Trustees acquired the Property at the time CGT event A1 occurred.

Under the general cost base and reduced cost base rules covered by subsections 110-25(2) of the ITAA 1997 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.

ATO ID 2009/129 states that on the making of the court order each co-owner's interest in realty is converted to personalty. It is expected that the market value of this property will equate to the share of net proceeds received.

The total of the first, second and third elements of the cost base of the Property will equal the capital proceeds, being the money that the Sale Trustees received in respect of the sale of the Property. Given that the proceeds from the sale of the Property will equal the cost base for the Sale Trustees, they will realise neither a capital gain nor a capital loss on the sale of the Property.

Question 2

Pursuant to section 104-10 of the ITAA 1997, did a CGT event A1 occur on XX April 20XX when the Sale Trustees sold the property to Taxpayer A?

Answer 2

Yes

Detailed reasoning

On XX April 20XX the ownership of the property changed from the Sale Trustees to Taxpayer A as the Purchaser. This was a change of ownership for the purposes of subsection 104-10(2) of the ITAA 1997.

ATO ID 2009/129 states that:

"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. 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...

On the making of the court order each co-owner's interest in realty is converted to personalty. It is expected that the market value of this property will equate to the share of net proceeds received.

CGT event E1 did not happen when the trust was created over the property. That event happens if you create a trust over a CGT asset by declaration or settlement: subsection 104-55(1) of the ITAA 1997. It is considered that this event has no application where the trust is created by order of a court, rather than by the actions of the owners of the property. That is, given the court's role, it is impossible to cast the co-owners in the role of 'you' for the purpose of CGT event E1."

The sale of the Property by way of Trustee sale by order of a court does not amount to the creation of a Trust for the purposes of section 104-55 of the ITAA 1997. The capital proceeds received by the Sale Trustees will likely be nil as their first, second and third elements of the cost base will equal the capital proceeds for the event.

Question 3

When the Bankruptcy Trustees disposed their interest in the Property to the Sale Trustees on XX May 20XX, was there a CGT event for the purposes of Part 3-1 of the ITAA 1997?

Answer 3

Yes

Detailed reasoning

CGT event A1 occurs as there is a change in ownership of the Property. Section 104-10(2) of the ITAA 1997 provides that:

"(2) You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner."

When the Bankruptcy trustees disposed of their interest to the Sale Trustees on XX May 20XX CGT event A1 occurred as per subsection 104-10(1) of the ITAA 1997.

Section 116-20 of the ITAA 1997 provides:

(1) The capital proceeds from a CGT event are the total of:

(a) the money you have received, or are entitled to receive, in respect of the event happening; and

(b) the market value of any other property you have received, or are entitled to receive, in respect of the event happening (worked out as at the time of the event).

The capital proceeds from the sale of the Property was a total of $XX. The Bankrupt had a 50% interest in the Property prior to them becoming bankrupt. The capital proceeds for the Bankrupt's 50% interest will be $XX.

The Sale Trustees undertook an obligation to pay the net proceeds to Taxpayer A and the Bankruptcy trustees acting in their capacity as trustees of the Bankrupt. The payment from the Sale Trustees will be the cost of acquisition for the purposes of calculating the Property's cost base (as per subsections 110-25(2) of the ITAA 1997 and 110-55(2) of the ITAA 1997).

The Bankruptcy trustees acted in their capacity as trustees of the Bankrupt. The capital proceeds that the Bankruptcy Trustees received from the Sale Trustees from the sale of the Property are the Bankrupts total capital proceeds less the cost base of the Property.

Question 4

Will the receipt of proceeds from the sale of the Property (being payment to the Bankruptcy Trustees of XX% of the net proceeds of sale of the Property after deductions in accordance with the XX November 20XX orders) give rise to a capital gains tax liability for the Bankruptcy Trustees in their capacity as Trustee for the Bankrupt Estate of the Bankrupt having regard to the operation of section 106-30 of the ITAA 1997?

Answer 4

Yes, Limited to the extent of obligations created by section 254 of the ITAA 1936.

Detailed reasoning

Section 106-30 of the ITAA 1997 provides:

(1) For the purposes of this Part and Part 3 - 3 (about capital gains and losses) and Subdivision 328-C (What is a small business entity), the vesting of the individual's CGT assets in the trustee under the Bankruptcy Act 1966 or under a similar foreign law is ignored.

(2) This Part, Part 3-3 and Subdivision 328-C apply to an act done in relation to a CGT asset of an individual in these circumstances as if the act had been done by the individual (instead of by the trustee etc.):

(a) as a result of the bankruptcy of the individual by the Official Trustee in Bankruptcy or a registered trustee, or the holder of a similar office under a foreign law;

(b) by a trustee under a personal insolvency agreement made under Part X of the Bankruptcy Act 1966, or under a similar instrument under a foreign law;

(c) by a trustee as a result of an arrangement with creditors under that Act or a foreign law.

Under subsection 106-30(1) of the ITAA 1997, the vesting of an individual's CGT assets in a trustee under the Bankruptcy Act 1966 (Cth) or under a similar foreign law is ignored.

Subsection 106-30(2) of the ITAA 1997 operates such that when vested bankruptcy property is disposed of, whether by the trustee in bankruptcy or by a mortgagee exercising power of sale, the primary tax liability for any capital gain made on the sale falls to the bankrupt individual.

Subsection 254(1)(a) of the ITAA 1936 provides:

(1) With respect to every agent and with respect also to every trustee, the following provisions shall apply:

(a) He or she shall be answerable as taxpayer for the doing of all such things as are required to be done by virtue of this Act in respect of the income, or any profits or gains of a capital nature, derived by him or her in his or her representative capacity, or derived by the principal by virtue of his or her agency, and for the payment of tax thereon.

In Commissioner of Taxation v Australian Building Systems Pty Ltd (in liq) (2015) HCA 48 (ABS) it was held by Kean J at 104:

"Section 254(1) is both a collecting provision and a liability-imposing provision in that, as an aid to the collection of tax, it imposes a personal liability to tax on the agent or trustee. Section 254(1)(a) expressly provides that an agent or trustee "shall be answerable as taxpayer ... for the payment of tax" on income, profits or gains derived by him or her in his or her representative capacity. This language creates a personal liability in an agent or trustee to pay tax albeit that this liability is ancillary to that of the principal or beneficiary."

Subsection 254(1) of the ITAA 1936 imposes obligations on every trustee in respect of any income or any profits or gains of a capital nature derived by them in their representative capacity, creating a secondary tax liability for agents and trustees, ancillary to the primary tax liability.

A trustee in bankruptcy is a trustee for the purposes of section 254 of the ITAA1936 in accordance with the definition of 'trustee' in subsection 6(1) of the ITAA 1936. As such, section 106-30 of the ITAA 1997 does not negate a trustee in bankruptcy from their obligations under section 254 of the ITAA 1936.

The Bankruptcy Trustees are trustees for the Bankrupt and while the primary tax liabilities with the Bankrupt, section 254 of the ITAA 1936 as a liability-imposing provision will operate to impose a personal liability on the Bankruptcy Trustees on income or gains derived by them in their representative capacity.

Question 5

In their capacity as Trustee for the Bankrupt Estate of the Bankrupt, will the Bankruptcy Trustees be required to lodge a tax return and include any capital gain as an agent or trustee consistent with subsection 254(1)(b) of the ITAA 1936?

Answer 5

Yes

Detailed reasoning

Subsection 254(1)(b) of the ITAA 1936 provides:

(1) With respect to every agent and with respect also to every trustee, the following provisions shall apply:

(b) He or she shall in respect of that income, or those profits or gains, make the returns and be assessed thereon, but in his or her representative capacity only, and each return and assessment shall, except as otherwise provided by this Act, be separate and distinct from any other.

Section 254 of the ITAA 1936 is triggered at the moment a trustee derives income, profits, or gains in his or her representative capacity. In ABS, the High Court described subsection 254(1) of the ITAA 1936 as both a liability-imposing provision and a collecting provision. It imposes a tax liability on the trustee, which is ancillary to the primary tax liability. It also provides a means of collecting the liability from the trustee in certain circumstances.

Subsection 254(1)(a) of the ITAA 1936 makes a trustee in bankruptcy answerable as taxpayer for the payment of tax on any income, profits or gains they derive in their representative capacity. The Bankruptcy Trustees as trustee of the Bankrupt derived gains from the sale dated XX May 20XX for the 50% interest in the property owned by the Bankrupt. As such, Bankruptcy Trustees as trustee are answerable under subsection 254(1)(a) for these gains.

If the Commissioner requires a trustee in bankruptcy to lodge a return under subsection 254(1)(b) of the ITAA 1936 the trustee in bankruptcy must do so, but only in their representative capacity. Similarly, if the trustee is assessed on the gain under subsection 254(1)(b), they are assessed in their representative capacity only. Gordon J explained the purpose of subsection 254(1)(b) in ABS (at paragraph 174):

"What s 254(1)(b) does is emphasise that in respect of the income or profits or gains referred to in sub-s(1)(a), the obligation of an agent or trustee to make a return and be assessed (as if the taxpayer) is in their representative capacity only. It is [an] ancillary liability. Its purpose is to ensure payment of the tax; tax which at least ordinarily will be primarily payable by another person or entity."

Paragraph 209 of Practice Statement Law Administration 2011/5 (PSLA 2011/5) provides that:

'an agent or trustee has the same responsibilities as the entity for complying with income tax law in respect of the income, or any profits, or gains of a capital nature, derived in a representative capacity or derived by the principal by virtue of an agency, and for payment of tax.'

Therefore, in their capacity as trustee for the bankrupt estate, where a trustee derives income, profits, or gains in a representative capacity, they are required to make returns, be assessed, and pay tax that is assessed on that income, profits, or gains.

Question 6

In their capacity as Trustee for the Bankrupt Estate of the Bankrupt, will the Bankruptcy Trustees be required to retain funds as an agent or trustee consistent with subsection 254(1)(d) of the ITAA 1936?

Answer 6

Yes, subject to a relevant assessment being made by the Commissioner

Detailed reasoning

Subsection 254(1)(d) of the ITAA 1936 provides:

(1) With respect to every agent and with respect also to every trustee, the following provisions shall apply:

(d) He or she is hereby authorized and required to retain from time to time out of any money which comes to him or her in his or her representative capacity so much as is sufficient to pay tax which is or will become due in respect of the income, profits or gains.

Subsection 254(1)(d) provides that a trustee of a bankrupt estate is authorised and required to retain money that is received in their representative capacity so much is as sufficient to pay tax which is or will become due in respect of the income, profits, or gains.

The High Court in the ABS decision considered the point where a trustee or agent comes under the retention obligation in subsection 254(1)(d) of the ITAA 1936 in respect of income, profits or gains derived by them in their representative capacity. The facts and circumstances of the case are not dissimilar to the present facts and circumstances to the extent that a trustee has derived income, profits, or gains in their capacity as trustee of the bankrupt.

Consistent with the Decision Impact Statement issued by the Commissioner in respect of ABS. The Commissioner accepts a trustee or agent has no obligation to retain monies under subsection 254(1)(d) of the ITAA 1936 until an assessment has first issued in respect of the income, profits, or gains.

This decision reflects the Commissioner's view that section 254 of the ITAA 1936 does not require the trustee to be assessable to tax under Part III, Division 6 of the ITAA 1936 in order for the retention obligation to be imposed.

While the primary obligation to retain the income, profits or gains and pay any resulting tax liability on those income, profits, or gains rests with the Bankrupt. Subsection 254(1)(b) of the ITAA 1936 creates a secondary obligation to also retain funds once a relevant assessment is made by the Commissioner. Bankruptcy Trustees as the bankruptcy trustee is not required to calculate or estimate the tax liability consistent with the decision held in ABS.

Once the Commissioner has made a relevant assessment, the obligations under subsection 254(1)(d) of the ITAA 1936 are enlivened that Bankruptcy Trustees must retain, from funds on hand or that subsequently come to them, enough money to pay the tax that has been assessed on the income, profits or gains derived in their representative capacity that the Commissioner can legally recover.

Question 7

In their capacity as Trustee for the Bankrupt Estate of Ho Wah Au, can the Bankruptcy Trustees be made personally liable for the tax payable in respect of the sale of the Property by the Sale Trustees or disbursement of the proceeds of sale of the Property by the Sale Trustees, including payment to the Bankruptcy Trustees of XX% of the net proceeds of sale after deductions in accordance with the XX November 20XX orders, consistent with subsection 254(1)(e) of the ITAA 1936?

Answer 7

Yes, subject to the Bankruptcy Trustees failing to retain funds consistent with subsection 254(1)(d) of the ITAA 1936.

Detailed reasoning

Subsection 254(1)(e) of the ITAA 1936 provides:

(1) With respect to every agent and with respect also to every trustee, the following provisions shall apply:

(e) He or she is hereby made personally liable for the tax payable in respect of the income, profits or gains to the extent of any amount that he or she has retained, or should have retained, under paragraph (d); but he or she shall not be otherwise personally liable for the tax.

Subsection 254(1)(e) of the ITAA 1936 creates a personal liability for the tax assessed under subsection 254(1)(b) of the ITAA 1936 to the extent that the trustee in bankruptcy should have retained an amount under subsection 254(1)(d) of the ITAA 1936.

The High Court in ABS affirmed that the obligation to retain monies under subsection 254(1)(d) of the ITAA 1936 is not enlivened until a notice of assessment has been issued in respect of the relevant income, profits or gains. In providing the proper construction of section 254 of the ITAA 1936 Gordon J provided at paragraph 177 in ABS:

"On the proper construction of s 254, there is no need to find another specific section in the revenue law rendering the agent or trustee liable for tax in respect of the "income, or any profits or gains of a capital nature" referred to in s 254(1)(a). If an agent or trustee has a liability under s 254(1)(e) because they failed to satisfy the retention obligation in s 254(1)(d), that liability is in addition to, and not in substitution for, any assessment of the beneficiary, principal or company (although of course only one amount of tax could ultimately be recovered)."

The Bankruptcy Trustees as trustee of the Bankrupt will not be made personally liable under subsection 254(1)(e) of the ITAA 1936 prior to the issue of a notice of assessment. Conversely, the Bankruptcy Trustees as trustee of the Bankrupt will be made personally liable under subsection 254(1)(e) of the ITAA 1936 to the extent of an amount that they should have retained under subsection 254(1)(d) of the ITAA 1936, once a notice of assessment has been issued.

Question 8

Is the disposal of the Property in relation to this ruling an excluded transaction from the Foreign Resident Capital Gains Withholding Regime for the purposes of section 14-215 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)?

Answer 8

Yes

Detailed reasoning

The foreign resident CGT withholding regime in Schedule 1 Subdivision 14-D of the TAA 1953 imposes an obligation on a purchaser who acquires from a foreign resident a CGT asset consisting of: (1) taxable Australian real property (TARP); (2) an indirect Australian real property interest; or (3) an option or right to acquire such property or interest.

While section 14-200 of Schedule 1 to the TAA 1953 imposes an obligation on the vendor to withhold 12.5% for the first element of the cost base and remit it to the Commissioner where the vendor is a foreign resident, there are excluded transactions in section 14-215 of Schedule 1 to the TAA 1953. Subsection 14-215(1)(g)(i) of Schedule 1 to the TAA 1953 provides:

(1) A transaction that results in the acquisition of a CGT asset is excluded under this section if:

(g) the transaction arises from any of the following:

(i) the administration of the estate of a bankrupt;

Note: This section is relevant to whether you must pay an amount to the Commissioner under section 14 - 200.

Where the foreign resident vendor is bankrupt and the sale is as a result of the administration of a bankrupt estate the withholding provisions will not apply. This will ensure that the withholding obligation will not disturb the priority of other creditors in the administration of the bankrupt estate. It is provided at 2.55 of the explanatory memorandum to the Tax and Superannuation Laws Amendment (2015 Measures No. 6) Bill 2015:

"Where the foreign resident is an individual, the amendments will not apply where the transaction arises from the administration of a bankruptcy estate, a composition or scheme of arrangement, a debt agreement, a personal insolvency agreement, or same or similar circumstances under a foreign law."

As the sale of the Property from Taxpayer A and the Bankruptcy trustees in their capacity as trustees of the Bankrupt to the Sale Trustees and then to Taxpayer A is in relation to the administration of the bankrupt estate of the Bankrupt, the transaction will be excluded from the withholding regime as indicated in section 14-200 of Schedule 1 to the TAA 1953.

Question 9

Will the capital gains made by Taxpayer A in respect of the sale of the Property be disregarded under section 118-110 of the ITAA 1997?

Answer 9

Yes

Detailed reasoning

Section 118-110 of the ITAA 1997 provides:

(1) A capital gain or capital loss you make from a CGT event that happens in relation to a CGT asset that is a dwelling or your ownership interest in it is disregarded if:

(a) you are an individual; and

(b) the dwelling was your main residence throughout your ownership period; and

(c) the interest did not pass to you as a beneficiary in, and you did not acquire it as a trustee of, the estate of a deceased person.

In administering the estate of the Bankrupt, the Bankruptcy Trustees sought to dispose of the Bankrupt's 50% interest in the Property. In doing so the Property was disposed by Taxpayer A and Bankruptcy Trustees in their capacity as trustee for the Bankrupt to the Sale Trustees appointed in accordance with the orders made on XX November 20XX and then 100% sold to Taxpayer A.

From the time of its purchase, the Property was the principal place of residence of Taxpayer A. Taxpayer A has made a capital gain on disposing of the Property to the Sale Trustees but this gain is disregarded as Taxpayer A is an individual who resided at the Property as their main residence and the interest in the Property did not pass to them as a beneficiary and they did not acquire as the trustee of the estate of a deceased person.

Question 10

In their capacity as Trustee for the sale of the Property, will the Sale Trustees be liable to include any amount in their assessable income or capital gains under Subdivision 115-C of the ITAA 1997 or under Division 6 of the ITAA 1936?

Answer 10

No

Detailed reasoning

Section 115-210 of the ITAA 1997 provides:

(1) This Subdivision applies if a trust estate has a net capital gain for an income year that is taken into account in working out the trust estate's net income (as defined in section 95 of the Income Tax Assessment Act 1936) for the income year.

In administering the sale of the property, the Sale Trustees were appointed by a court order on XX November 20XX to sell the Property on behalf of Taxpayer A and the Bankruptcy Trustees acting in their capacity as trustee for the Bankrupt to discharge the XX% previously held by the Bankrupt.

The sale of the Property by way of trustee sale by order of a court does not amount to the creation of a trust for the purposes of section 104-55 of the ITAA 1997. The capital proceeds of the Sale Trustees will likely be nil as their first, second and third elements of the cost base will equal the capital proceeds for the event. As such no capital gain will be recorded for the Sale Trustees and neither Subdivision 115-C of the ITAA 1997 or Division 6 of the ITAA 1936 will have application.