Private ruling: Disposal of preference shares
Date of advice: 13 May 2019
Published: June 2019

Ruling: Q1: Are the Dividends included in Company A’s assessable income under section 44 of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes | Q2: Are the franking credits attached to the Dividends included in Company A’s assessable income (and is Company A entitled to a corresponding tax offset) pursuant to section 207-20 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A2: Yes | Q3: For the purposes of calculating the gain or loss on the sale of its Preference Shares under section 6-5 or section 8-1 of the ITAA 1997, do the proceeds received by Company from the sale of its Preference Shares include the Discretionary Dividend received by Company A? | A3: No | Q4: For the purposes of calculating the gain or loss on the sale of its Preference Shares under section 6-5 or section 8-1 of the ITAA 1997, do the proceeds received by Company A from the sale of its Preference Shares include the Ordinary Dividend received by Company A? | A4: No | Q5: Does paragraph 207-145(1)(a) of the ITAA 1997 apply to Company A in respect of the Dividends? | A5: No | Q6: Does section 177E of the ITAA 1936 apply to allow the Commissioner to make a determination under section 177F of the ITAA 1936 to include an amount in Company A’s assessable income in respect of the Dividends? | A6: No | Q7: Does paragraph 207-145(1)(d) of the ITAA 1997 apply to Company A in respect of the Dividends? | A7: No | Q8: Does section 204-30 of the ITAA 1997 apply to allow the Commissioner to make a determination under paragraph 204-30(3)(c) of the ITAA 1997 denying imputation benefits to Company A in respect of the Discretionary Dividend? | A8: No | Q9: Does section 204-30 of the ITAA 1997 apply to allow the Commissioner to make a determination under paragraph 204-30(3)(c) of the ITAA 1997 denying imputation benefits to Company A in respect of the Ordinary Dividend? | A9: No | Q10: Does section 177EA of the ITAA 1936 apply to allow the Commissioner to make a determination under paragraph 177EA(5)(b) of the ITAA 1936 denying imputation benefits to Company A in respect of the Discretionary Dividend? | A10: No | Q11: Does section 177EA of the ITAA 1936 apply to allow the Commissioner to make a determination under paragraph 177EA(5)(b) of the ITAA 1936 denying imputation benefits to Company A in respect of the Ordinary Dividend? | A11: No

Relevant facts and circumstances: Company A applied for a private ruling in respect of the disposal of its Preference Shares in a company. Prior to entering into the contract for sale, the company declared a Discretionary Dividend and an Ordinary Dividend.