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INCOME TAX ASSESSMENT ACT 1997 - SECT 122.50

All assets acquired on or after 20 September 1985

  (1)   If you * acquired all of the assets of the * business on or after 20   September 1985:

  (a)   the first element of each * share's * cost base is the sum of the * market values of the * precluded assets and the cost bases of the other assets (less any liabilities the company undertakes to discharge in respect of all of those assets) divided by the number of shares; and

  (b)   the first element of each share's * reduced cost base is worked out similarly.

Note 1:   There are rules for working out what are the liabilities in respect of an asset: see section   122 - 37.

Note 2:   There are special indexation rules for roll - overs: see Division   114.

Example:   Nick is a small trader. He wants to incorporate his business. He disposes of all its assets to a company and receives 10 shares in return.

  Nick acquired all the assets of the business after 20   September 1985.

  Trading stock, plant and equipment and office furniture are precluded assets.

  The market value of Nick's trading stock when he disposed of it is $20,000. The market value of his plant and equipment at that time is $50,000 and the market value of his office furniture at that time is $10,000.

  The cost bases of Nick's land and buildings at that time total $120,000.

  Nick has a business overdraft of $15,000. It is taken to be a liability in respect of all the assets of his business.

  The first element of the cost base of the 10 shares is:

Start formula open bracket $20,000 plus $50,000 plus $10,000 plus $120,000 close bracket minus $15,000 equals $185,000 end formula

  The first element of the reduced cost base of the 10 shares is worked out similarly.

  (2)   The * market value of an asset is worked out when you * disposed of it. The * cost base or * reduced cost base of an asset is worked out at the same time.


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