Private ruling: Capital proceeds from CGT event
Published: March 2012
Ruling period: 1 July 2007 - 30 June 2008
Date scheme commenced: 1 July 2007

Ruling: Q1: Should the market value of the units received for the sale of the capital gains tax (CGT) asset be included in the capital proceeds for the sale under subsection 116-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: You as trustee for a unit trust, disposed of its interest in a business. A combination of cash and units in the acquirer group were received for the sale. The units in the acquirer group were issued at $X by the business. The units were subject to considerable restrictions, including the inability of the unit holder to dispose of the units within at least a five year period. In addition, the trustee of the acquirer group had the ability to redeem the units at any time for such consideration which, in the absolute discretion of the trustee, represented the fair value of the units. A few years after receiving the special class units, the units were redeemed for nil consideration. The capital proceeds calculated in accordance with Division 116 included the issue price of the units. You have not requested the Commissioner to rule on the market value of the units. As such, in providing this ruling the Commissioner forms no opinion on the market value of the units as at the time of the CGT event.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 116-20

Reasons for decision: Summary: The legislative references referred to herein are from the ITAA 1997, unless otherwise stated. On 21 September 2007, you disposed of your interest in the business which caused a CGT event A1 under section 104-10 to occur. Section 116-20 sets out the general rules about capital proceeds from a CGT event. Subsection 116-20(1) states: '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).' Upon disposal of your interest in the business, amongst other things you received the units in question. As such, under subsection 116-20(1) your capital proceeds will include the market value of the units at the time of the CGT event. You have not requested the Commissioner to rule on the market value of the units. As such, in providing this ruling the Commissioner forms no opinion on the market value of the units as at the time of the CGT event.

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