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INCOME TAX ASSESSMENT ACT 1997 - SECT 723.105

Reduced cost base of interest reduced when interest realised at a loss

  (1)   The * reduced cost base of a * primary equity interest, * secondary equity interest, or * indirect primary equity interest, in a company or trust is reduced just before a * realisation event that is a * CGT event happens to the interest if:

  (a)   apart from this Division, a loss would be * realised for income tax purposes by the CGT event; and

  (b)   apart from this Division, a loss would have been * realised for income tax purposes by a realisation event if the event had happened, just before the CGT event, to a * CGT asset (the underlying asset ) that the company or trust then owned and that:

  (i)   was not then a * depreciating asset; or

  (ii)   was then an item of * trading stock of the company or trust; or

  (iii)   was then a * revenue asset of the company or trust; and

  (c)   the loss referred to in paragraph   (b) would have been reduced under Subdivision   723 - A by an amount (the underlying asset loss reduction ); and

  (d)   for the entity (the transferor ) that owned the interest just before the CGT event, the interest was a * direct roll - over replacement or * indirect roll - over replacement for the underlying asset.

  (2)   If the interest was a * direct roll - over replacement, its * reduced cost base is reduced by the amount worked out using this formula, unless that amount does not appropriately reflect the matters referred to in subsection   (4):

Start formula start fraction RCB of interest over Total of RCBs of direct roll-over replacements end fraction times Underlying asset loss reduction end formula

  (3)   For the purposes of the formula in subsection   (2):

"RCB of interest" means the interest's * reduced cost base when the transferor * acquired it.

"total of RCBs of direct roll-over replacements" means the total of the * reduced cost bases of all * direct roll - over replacements for the underlying asset when the transferor * acquired them.

  (4)   If:

  (a)   the interest was an * indirect roll - over replacement; or

  (b)   the amount worked out under subsection   (2) does not appropriately reflect the matters referred to in this subsection;

the interest's * reduced cost base is reduced by an amount that is appropriate having regard to these matters:

  (c)   the underlying asset loss reduction; and

  (d)   the quantum of the interest relative to all * direct roll - over replacements and indirect roll - over replacements that the transferor owns or has previously owned.


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