Income Tax Assessment Act 1997

Preservation of application of subdivision 165-CC (about unrealised losses)  
705-120(1)
The object of this section is to transfer to the assets of the joining entity any potential application of Subdivision 165-CC (about unrealised capital and revenue losses) that existed in respect of the ^* head company ' s ^* membership interests in the joining entity just before the joining time. This is done because the head company ' s cost of becoming the holder of the joining entity ' s assets is recognised under this Division as an amount reflecting the group ' s cost of acquiring the joining entity.

705-120(2)
This section applies if, assuming the ^* head company had, just before the joining time, made a ^* capital loss or a ^* trading stock loss in respect of a ^* CGT event that happened to a ^* CGT asset consisting of its ^* membership interests (the Subdivision 165-CC membership interests ) in the joining entity, Subdivision 165-CC would apply to the head company.

705-120(3)
If this section applies, then, in applying Subdivision 165-CC for the head company core purposes, the following percentage of each of the ^* CGT assets, that become those of the head company because subsection 701-1(1) (the single entity rule) applies, is taken to have been owned by the ^* head company at the changeover time mentioned in sections 165-115C and 165-115D :

*Market value of Subdivision 165-CC membership interests just before joining time Market value of all *membership interests in joining entity just before joining time

×   100%

705-120(4)
For the ^* head company core purposes, section 701-5 (the entry history rule) does not have the effect that Subdivision 165-CC applies to a ^* capital loss or a ^* trading stock loss in respect of a ^* CGT event that happens to any ^* CGT asset that becomes that of the head company because subsection 701-1(1) (the single entity rule) applies.