Document ID: chunk:federal_register_of_legislation:C2025C00029:section:4:p3
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 4 (pt 3/12)
Character Range: 1934504–1937204

of the departing partner's interest in a partnership asset.
Note: The remaining partners would not be affected if the departing partner sells its interests to an entity that was not a partner.
Example: (Indexation is ignored for the purpose of this example).
 John, Wil and Patricia form a partnership (in equal shares).
 John contributes a building (which is a pre‑20 September 1985 asset) having a market value of $200,000. Wil and Patricia contribute $200,000 each in cash.
 The partnership buys another asset for $400,000.
 John is taken to have disposed of 2/3 of his interest in the building (1/3 to Wil and 1/3 to Patricia). His remaining 1/3 share in the building remains a pre‑CGT asset. The 1/3 shares that Wil and Patricia acquire are post‑CGT assets.
 Wil retires from the partnership when the partnership assets have a market value of $1,200,000 ($500,000 for the building and $700,000 for the other asset). John and Patricia pay Wil $400,000 for his interest in the partnership.
 Wil has a capital gain of $100,000 on the building and $100,000 on the other asset. John and Patricia each acquire an additional 1/6 interest in the partnership assets. These additional interests are separate assets and post‑CGT assets.
 (4) If a new partner is admitted to a partnership:
 (a) the new partner *acquires a share (according to the partnership agreement, or partnership law if there is no agreement) of each partnership asset; and
 (b) the existing partners are treated as having *disposed of part of their interest in each partnership asset to the extent that the new partner has acquired it.
Example: (Indexation is ignored for the purpose of this example).
 Lyn and Barry form a partnership, each contributing $15,000 to its capital. The partnership buys land for $30,000.
 The land increases in value to $300,000.
 Andrew is admitted as an equal partner, paying Lyn and Barry $50,000 each to acquire a 1/3 share in the land. His cost base is $100,000.
 Lyn and Barry have each disposed of 1/3 of their interest in the land. Each has a cost base for that interest of $5,000, and capital proceeds of $50,000, leaving them with a capital gain of $45,000 each on Andrew's admission to the partnership.
 The land is sold for its market value.
 Andrew has no capital gain on the land.
 Lyn and Barry have disposed of their remaining 2/3 original interest in the land for capital proceeds of $100,000, leaving each of them with a capital gain of:

Subdivision 106‑B—Bankruptcy and liquidation

Table of sections
106‑30 Effect of bankruptcy
106‑35 Effect of liquidation

106‑30  Effect of bankruptcy
 (1) For the purposes of this Part and Part 3‑3 (about capital gains and losses) and Subdivision