Artificially creating capital losses through default beneficiary arrangement to offset capital gains

A trust is established for the benefit of discretionary objects. 2. The deed for that trust confers discretionary powers of appointment of income and capital on the trustee or a third party appointor. 3. The trust has a named default beneficiary who on the termination date will take any trust capital that has not been appointed. 4. The default beneficiary may also be one of the discretionary objects. 5. The default beneficiary does not give any money or property to acquire the interest in the trust capital. 6. The default beneficiary assigns all their interests (default and discretionary interests) in the trust to a third party (for example, a spouse). 7. The assignment of rights to trust capital is said to produce entitlement to a capital loss for the default beneficiary (under CGT event E8). 8. The basic features of the arrangement can be summarised diagrammatically as follows: