ATO Interpretative Decision
ATO ID 2002/394 (Withdrawn)
Income Tax
Beneficiary becoming entitled to a trust asset - disregarding any capital gain or loss by the trusteeFOI status: may be released
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This ATO ID is withdrawn as the issues are now dealt with in Taxation Ruling TR 2004/D25.This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Will a capital gain or loss made by a trustee be disregarded under subsection 104-75(4) of the Income Tax Assessment Act 1997 (ITAA 1997), upon the vesting of the trust, with the beneficiaries becoming absolutely entitled to the trust assets (shares in a company) where the assets of the trust were acquired prior to 20 September 1985?
Decision
Yes, where the assets were acquired prior to 20 September 1985, any capital gain or loss that accrues to the trustee upon the vesting of the trust, with the beneficiaries becoming absolutely entitled to the shares as against the trustee will be disregarded under subsection 104-75(4) of the ITAA 1997.
Facts
A discretionary trust was established prior to 20 September 1985. The trust property comprises shares (acquired prior to 20 September 1985) in a private company. It is proposed to vest the trust, with the beneficiaries becoming absolutely entitled to the shares.
Reasons for Decision
The proposed vesting of the trust will mean that each beneficiary becomes absolutely entitled to a CGT asset of the trust (in this case, shares) as against the trustee, causing CGT event E5 to happen under section 104-75 of the ITAA 1997. The time of the event is when each beneficiary becomes absolutely entitled to the shares.
The trustee makes a capital gain if the market value of the shares at the time of the event is more than the cost base of the shares, and makes a capital loss if the market value is less than the reduced cost base of the shares (subsection 104-75(3) of the ITAA 1997).
However, as the shares were acquired by the trustee before 20 September 1985, and did not stop being pre-CGT assets of the trust, any capital gain or loss that arose would be disregarded as provided in subsection 104-75(4) of the ITAA 1997.
Date of decision: 14 March 2002Year of income: Year ending 30 June 2002
Legislative References:
Income Tax Assessment Act 1997
section 104-75
subsection 104-75(3)
subsection 104-75(4)
Keywords
Beneficiaries
Capital gains
Capital gains tax
CGT assets
Market value cost base
Non fixed trusts
Time of CGT event
Trust beneficiaries
Trust deeds
Trusts
ISSN: 1445-2782
| Date: | Version: | |
| 14 March 2002 | Original statement | |
| You are here | 5 May 2006 | Archived |