Document ID: chunk:federal_register_of_legislation:C2010C00604:clause:12_4
Version: federal_register_of_legislation:C2010C00604
Segment Type: clause
Provision Reference: sch 12 cl 4
Character Range: 220870–222775

4  At the end of Subdivision 719‑C
Add:

719‑170  Modified effect of subsections 705‑175(1) and 705‑185(1)

 (1) This section applies if all of the *members of a *MEC group (the acquired group) become members of another MEC group, or of a *consolidated group, at a particular time (the acquisition time) as a result of the *acquisition of *membership interests in:
 (a) the *head company of the acquired group; and
 (b) other entities that were *eligible tier‑1 companies of the acquired group just before the acquisition time.

 (2) Subsections 705‑175(1) and 705‑185(1) have effect as if a *membership interest in an entity mentioned in paragraph (1)(b) of this section were a membership interest in the *head company of the acquired group.

Note 1: If the acquiring group is a MEC group, and the head company of the acquired group becomes an eligible tier‑1 company of the acquiring group, the assets of the members of the acquired group do not have their tax cost reset at the acquisition time. This is because:

(a) section 719‑160 treats an entity becoming an eligible tier‑1 company of the acquiring group as if it were a part of the head company of that group; and

(b) section 705‑185 treats the subsidiary members of the acquired group as part of the head company of the acquired group.

Note 2: If:

(a) the acquiring group is a MEC group, but the head company of the acquired group does not become an eligible tier‑1 company of the acquiring group; or

(b) the acquiring group is a consolidated group and the acquired group is a MEC group;

 the assets of the members of the acquired group have their tax cost reset at the acquisition time (section 719‑160 does not preclude tax cost resetting in these cases). For the purposes of resetting the tax cost of those assets, section 705‑185 treats the subsidiary members of the acquired group as part of the head company of the acquired group.