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INCOME TAX ASSESSMENT ACT 1997 - SECT 715.255

Consequences if leaving entity is a loss company at the leaving time

             (1)  If:

                     (a)  section 715- 245 or 715-250 applies; and

                     (b)  the leaving entity is a * loss company at the leaving time; and

                   (ba)  the * head company has a relevant equity interest under section 165-115X in the leaving entity at the leaving time;

the head company must choose whether subsection (2) or (3) of this section has effect for the purposes of applying, to each * membership interest in the leaving entity, in relation to the time just before the leaving time, whichever of these provisions is appropriate:

                     (c)  subsection 701-55(3) (about trading stock);

                     (d)  subsection 701-55(5), but only so far as it relates to working out the * reduced cost base of a * membership interest that was * acquired on or after 20 September 1985;

                     (e)  subsection 701-55(6) (about revenue assets).

Note:          Section 701- 55 is about setting the tax cost of an asset.

          (1A)  For the purposes of paragraph (1)(ba), in determining whether the * head company has the relevant equity interest, disregard the operation of subsection 701-1(1) (the single entity rule) in applying subsections 165-115X(2C) and 165-115X(4).

             (2)  If the * head company chooses this subsection, the interest's * tax cost setting amount (apart from this section) just before the leaving time is reduced to nil.

             (3)  If the * head company chooses this subsection, the interest's * tax cost setting amount (apart from this section) just before the leaving time is reduced by the adjustment amount under section 165-115ZB, which is calculated on the basis that:

                     (a)  just before the leaving time, all the * membership interests in the leaving entity constituted a single relevant equity interest under section 165-115X that the head company had in the leaving entity; and

                     (b)  the adjustment amount is worked out and applied in accordance with subsection 165-115ZB(6), but disregarding the paragraphs of that subsection except paragraphs 165-115ZB(6)(a) and (d).

             (4)  The * head company's choice must be made within 6 months after the leaving time, or within a further period allowed by the Commissioner.

             (5)  After that 6 months, or that further period, the head company is taken to have chosen subsection (2) unless it is established that the head company made a different choice within that 6 months or further period.

Non-membership equity interests

             (6)  Subsection 711-15(2) (which treats * non-membership equity interests as * membership interests) also applies for the purposes of this section, on the basis that the * consolidated group referred to in section 715- 240 is the old group referred to in that subsection.



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