Issue
When a trust has obtained rollover under Subdivision 124-N of the Income Tax Assessment Act 1997 (ITAA 1997) and CGT event J4, section 104-195 of the ITAA 1997, later happens, does the trustee of the trust make a capital gain or a capital loss resulting from that CGT event?
Decision
No. The trust that has obtained rollover under Subdivision 124-N of the ITAA 1997 does not make any capital gain or a capital loss from CGT event J4.
Facts
A fixed trust disposed of all of its CGT assets to a company and ceased to exist.
The trust and the company both chose to obtain rollover under Subdivision 124-N of the ITAA 1997.
The trust took more than six months to transfer all its CGT assets to the company.
There were no circumstances beyond the trustee's control which caused the transfer of the trust's CGT assets to take more than six months.
Reasons for Decision
CGT event J4 happens where: there is a rollover under Subdivision 124-N of the ITAA 1997 for a trust disposing of a CGT asset to a company under a trust restructure (paragraph 104-195(1)(a) of the ITAA 1997); the trust fails to cease to exist within 6 months after the first asset is disposed of to the company or as soon as practicable after the end of that 6 month period (paragraph 104-195(1)(b) of the ITAA 1997); and the company owns the asset when the failure happens (paragraph 104-195(1) (c) of the ITAA 1997).
As a result of the CGT event happening, the benefits of the rollover are negated and a capital gain or a capital loss may be made on each of the assets referred to in paragraph 104-195(1)(c) of the ITAA 1997. In these circumstances, however, those capital gains or capital losses are made by the company.
[Note: CGT event J4 can also happen to a shareholder in the company.]