Commissioner of Taxation (Cth) v Sun Alliance Investments Pty Limited (in liquidation)

Income tax – Capital gains and losses - Reduced amount of any consideration in respect of the acquisition of an asset - Royal and Sun Alliance Insurance Australia Holdings Limited ("RSA") formed by merger of the Royal Group and the Sun Alliance Group - RSA deemed by operation of s 160ZZS of the Income Tax Assessment Act 1936 (Cth) ("the 1936 Act") to have acquired shares in two wholly owned subsidiaries on date of merger for a consideration equal to the market value of those shares on that date - Reconstructed accounts of subsidiaries showed unrealised accretions to the value of their assets at the merger date - Subsidiaries subsequently declared and paid dividends to RSA which attracted a rebate of tax payable on the dividends - RSA disposed of its shares in the subsidiaries and claimed capital losses on the disposals - Losses sought, in part, to be transferred to taxpayer - Whether, pursuant to s 160ZK of the 1936 Act, the consideration in respect of RSA's deemed acquisition of shares in the subsidiaries was required to be reduced by a rebatable dividend adjustment - Whether dividends distributed by the subsidiaries were attributable to profits derived by them before RSA's deemed acquisition of shares in those subsidiaries - Whether unrealised accretions to the value of assets must have permanent character in order to be profits - Whether unrealised profits can be said to be derived.

Words and phrases – "attributable to profits that were derived".

Income Tax Assessment Act 1936 (Cth) – s 160ZK(5)(b).