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Income tax: capital gains: what is the amount of the consideration received in respect of the disposal of an asset where the consideration consists of shares which will be delivered at a later date and decline in value prior to delivery?

Preamble

The consideration in respect of the disposal of such an asset is the market value of the shares on the date of disposal of the asset (paragraph 160ZD(1)(b) of the Income Tax Assessment Act 1936). Note: It has been suggested that section 160ZF applies in this situation. This section does not apply because it is confined to situations where the whole or part of the consideration has not been and is not likely to be received. Example: On 1 January 1990, Anne sells her block of land valued at $50,000 for 10,000 shares in X Ltd to be delivered in 18 months time. At the time the land was sold, the shares had a market value of $5 each. At 1 July 1991, the market value of the shares had declined to $1.25 each. The consideration for the disposal of the land is the market value of the shares at 1 January 1990 viz. $5 x 10,000 = $50,000.

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