(1) This section applies if:
(a) you cease to have a * financial arrangement (or part of a financial arrangement); and
(b) you make a loss from ceasing to have the arrangement (or that part of the arrangement); and
(c) if the arrangement is a marketable security (within the meaning of section 70B of the Income Tax Assessment Act 1936 ):
(i) you did not acquire the arrangement in the ordinary course of trading on a securities market (within the meaning of that section); and
(ii) at the time you acquired the arrangement, it was not open to you to acquire an identical financial arrangement in the ordinary course of trading on a securities market; and
(d) if the arrangement is a marketable security--you did not dispose of the arrangement in the course of trading on a securities market; and
(e) it would be concluded that you ceased to have the arrangement wholly or partly because there was an apprehension or belief that the other party or other parties to the arrangement were, or would be likely to be, unable or unwilling to discharge all their liabilities to pay amounts under the arrangement.
(2) The amount of the loss is reduced by so much of that amount as is a loss of capital or a loss of a capital nature.
Note: However, the amount by which the loss is reduced is a capital loss.
(3) In applying paragraph (1)(e), you must have regard to:
(a) the financial position of the other party or parties to the * financial arrangement; and
(b) the perceptions of the financial position of the other party or parties to the arrangement; and
(c) other relevant matters.