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Buy/sell agreements - the CGT consequences aren't entirely clear,

Publication date: 17 Aug 05 | Source: CAPITAL GAINS TAX BULLETIN

Issue: No 2 17 August 2005

Pages: pp. 2-4

Abstract:

Buy/sell agreements have become a fairly standard feature of the commercial landscape for business partners who wish to ensure the proper succession of the business or disablement of any of the partners.

As a starting point, it should be understood that while, ordinarily, the grant of an option will create an immediate CGT liability for the grantor in terms of CGT event D2 (granting an option), in ATOID 2003/1190 and ATOID 2004/668, the Tax Office takes the position that, as the option agreement is only legally enforceable on the death or disablement of one of the parties, there are no immediate CGT consequences. 

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Kirk WILSON
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