In support of its submission that the shares were not paid out of profits, the taxpayer pointed to the fact that the market value of the shares distributed to shareholders exceeded the amount which Hewlett Packard debited to its retained earnings account. In rejecting this submission, Kenny and Allsop JJ said, at para 8:
"The shares were distributed out of a profit account. That was the complete explanation given by Hewlett-Packard for the distribution of shares. The difference between the market value of the shares and the extent of the adjustment in the accounts does not, in our view, require a further explanation of the source of that additional value to understand what, from the company’s perspective, is the source of the distribution of the shares. The terms of s 44(1)(a), applied here to the distribution in specie of shares, do not require that the source of the fund "liberated" or distributed (cf Davis Investments Pty Ltd v Commissioner of Stamp Duties (NSW) (1958) 100 CLR 392 at 407) in the hands of the shareholder be explained. Rather, one must ascertain, from the company’s perspective whether the shares were distributed out of profits. The accounts reveal the answer to that question - the retained earnings account."
Condell v FCT  FCAFC 44 (Full Federal Court; Kenny, Gyles and Allsop JJ; 28 March 2007).
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