Private ruling: Determination of market value for purpose of calculating available fraction
Published: December 2013

Ruling: Q1: In determining the market value of an entity for the purposes of section 707-325 of the ITAA 1997, should the value of redeemable preference shares issued by B Co be added to the value of ordinary shares issued by B Co? | A1: No.

Relevant facts and circumstances: It is anticipated A Co (head company of A MEC group) will elect for the ET-1 companies of B MEC group to join the A MEC group. B Co (provisional head company of B MEC group) has both redeemable preference shares and ordinary shares on issue. The redeemable preference shares are debt for tax and a financial liability for financial accounting purposes. B Co has revenue tax losses and capital losses.

Relevant legislative provisions: Section 707-325 of the ITAA 1997

Reasons for decision: Summary: The Commissioner considers it inappropriate to sum the value of the redeemable preference shares and ordinary shares issued by the entity to determine the market value of the entity, as it is necessary to value the entity itself, rather than the interests issued by the entity.