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06 Mar 07 AAT Part IVA ruling upheld - Cumins

The Full Federal Court (Ryan, Tamberlin and Middleton JJ) has dismissed the taxpayer's appeal from the decision of Nicholson J, who had in turn dismissed the taxpayer's appeal from a decision of the AAT.

The AAT held that Part IVA applied to a "contrived" sale of shares that generated a capital loss. The taxpayer, acting in his capacity of the trustee of one trust, sold the shares to himself in his capacity of trustee of a second trust. The taxpayer was a beneficiary of both trusts. The capital loss generated by the sale, if allowable, would have offset a capital gain derived by the taxpayer on another share sale transaction. The shares which generated the capital loss were mortgaged to a bank by way of security for a substantial loan to the taxpayer in his capacity of trustee of the first trust. The shares were registered in the bank's name. The bank was not informed of the sale of the shares by the taxpayer to himself in his different capacities.

The Full Federal Court agreed with Nicholson J that the AAT had not erred in law in its determination of the question before it. The AAT had taken all relevant matters into account and gave proper weight to the taxpayer's submissions. The taxpayer's appeal was dismissed: Cumins v FCT [2007] FCAFC 21 (Full Federal Court; Ryan, Tamberlin and Middleton JJ; 2 March 2007).

For a copy of the decision, go here

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