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02 Oct 077 Breach of trust compensation income

The AAT (Downes J, President) has held that a substantial lump sum paid to the taxpayer (who had a life interest in the income of four trusts) as compensation for breaches of trust by the trustees was received by the taxpayer as income even though it was paid out of capital. The only entitlement of the taxpayer was an entitlement to income and the payment remained income, or compensation for lost income, though paid out of capital: Life Interest Beneficiary and FCT [2007] AATA 1791 (AAT, Downes J, President, 21 September 2007).

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