Issue
Is the taxpayer entitled to a deduction under section 25-40 of the Income Tax Assessment Act 1997 (ITAA 1997) for a loss on the sale of shares acquired on or after 20 September 1985?
Decision
No. The taxpayer is not entitled to a deduction under section 25-40 of the ITAA 1997 for a loss on the sale of shares acquired on or after 20 September 1985.
Facts
The taxpayer acquired shares with the intention of making a profit on the resale of those shares. The shares were acquired on or after 20 September 1985.
The shares were not acquired with the intention of long term holding for capital appreciation or to derive assessable income as dividends or bonus share issues.
The taxpayer made a net loss from buying and selling shares.
The taxpayer is not in a business of share trading.
Reasons for Decision
Subsection 25-40(1) of the ITAA 1997 allows a deduction for a loss arising from the carrying out of a profit-making undertaking if any profit from that undertaking would have been included in the taxpayer's assessable income by section 15-15 of the ITAA 1997.
However, subsection 25-40(2) of the ITAA 1997 provides that a loss from a profit-making undertaking is not an allowable deduction if the loss arises in respect of the sale of property acquired on or after 20 September 1985. The term 'property' encompasses not only physical assets but also intangible assets such as shares and securities.
As the shares constitute property acquired by the taxpayer on or after 20 September 1985, the loss on the sale of the shares is not an allowable deduction under section 25-40 of the ITAA 1997.