(1) If the entity ceases to be a * subsidiary member of the group, this section has effect for the head company core purposes, so far as they relate to the income year in which the entity ceases to be a subsidiary member or any later income year.
Note: This section could have effect, for example, if an entity ceases to be a subsidiary member of the group because:
(a) it ceases to satisfy the requirements to be a subsidiary member; or
(b) the head company ceases to satisfy the requirements to be a head company (thereby bringing the group to an end).
(2) The object of this section is to preserve the alignment of the * head company's costs for * membership interests in each entity and its assets by recognising, when an entity ceases to be a * subsidiary member of the group, the cost of those interests as an amount equal to the cost of the entity's assets at that time reduced by the amount of its liabilities.
Note: The head company's costs for membership interests in entities was aligned with the costs of their assets when the entities became subsidiary members of the group.
Setting tax cost of membership interests
(3) For each * membership interest that the * head company of the group holds in an entity that ceases to be a * subsidiary member, the interest's * tax cost is set just before the entity ceases to be a subsidiary member at the interest's * tax cost setting amount.
Note 1: The membership interests would include those that are actually held by subsidiary members of the group, but which are treated as those of the head company under the single entity rule.
Note 2: If the entity is a partnership, Subdivision 713-E sets the tax cost of interests in partnership assets, rather than membership interests in the partnership.