Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p17
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 17/45)
Character Range: 5950477–5953371

a subsidiary member of the group); or
 (iii) an amount is required to be subtracted (also the third entity's profit/loss adjustment amount) under step 5A in the table in section 705‑60 (about *FRT disallowed amounts accruing to a joined group before the joining time);
then, for the purposes of working out under section 705‑35 the *tax cost setting amount for the assets of the first entity, the *market value of the first entity's membership interests in the second entity is reduced (in a subparagraph (d)(i) case) or increased (in a subparagraph (d)(ii) or (iii) case) by the first entity's interest in the third entity's profit/loss adjustment amount (see subsection (5)).

First entity's interest in third entity's profit/loss adjustment amount
 (5) The first entity's interest in the third entity's profit/loss adjustment amount is worked out using the formula:
where:
market value of first entity's membership interests in third entity held through second entity means the *market value of all *membership interests in the third entity that the first entity holds indirectly through the second entity (including through that entity and one or more other entities that become *subsidiary members of the group and are interposed between the second entity and the third entity).

705‑163  Modified application of section 705‑57

Object
 (1) The object of this section is to ensure that, in working out *tax cost setting amounts for *trading stock, *depreciating assets, *registered emissions units or *revenue assets of entities that become *subsidiary members of the group at the formation time, section 705‑57 (about loss of pre‑CGT status of certain *membership interests) only applies if the *membership interests held directly by the *head company of the group are affected.

Modified application of section 705‑57—basic modification
 (2) For the purposes of applying section 705‑57 in accordance with this Subdivision, a reference in that section to a *membership interest that a *member of the joined group holds in the joining entity at the joining time is taken to be a reference to a *membership interest that the *head company of the *consolidated group holds directly in an entity becoming a *subsidiary member at the formation time.

Modified application of section 705‑57—additional modifications where section 705‑145 applies
 (3) Also, if an entity (the first entity) that becomes a *subsidiary member holds a *membership interest (the subject membership interest) in another entity (the second entity) that becomes a subsidiary member, section 705‑57 (as modified in accordance with subsection (2)) is to be applied in relation to the subject membership interest as follows.
 (4) First work out whether there would be a reduction under that section in the *tax cost setting amount for the subject membership interest that is used as mentioned in subsection 705‑145(3) (the