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03 Dec 088 Extinguished liabilities counted "at the leaving time" - Handbury

The Federal Court (Kenny J) has held that liabilities of a subsidiary company were to be taken into account when the subsidiary left a consolidated group, notwithstanding the fact that the very act of "leaving" was caused by the issue of shares to the creditors (being persons other than the head company) in consideration of the extinguishment of the liabilities. In particular, the Court held that the phrase "at the leaving time" in s 711-45(1) ITAA 1997 meant "just before the leaving time". This resulted in the taxpayer deriving two large capital gains which would not otherwise have arisen: Handbury Holdings Pty Ltd v FCT [2008] FCA 1787 (Federal Court, Kenny J, 28 November 2008).

For a copy of the decision, go here.

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