INCOME TAX ASSESSMENT ACT 1997 - SECT 240.7 How the recharacterisation affects the notional buyer

INCOME TAX ASSESSMENT ACT 1997 - SECT 240.7

Effect of notional purchase

  (1)   The cost of the acquisition is either the price stated as the cost or value of the property or its arm's length value. If the notional buyer is acquiring the property as trading stock, the normal consequences of acquiring trading stock follow. In particular, the notional buyer can usually deduct the purchase price.

  (2)   If the property is not trading stock, the notional buyer may be able to deduct amounts for the expenditure under Division   40 (about capital allowances).

Effect of notional loan

  (3)   The notional buyer may be able to deduct notional interest payments over the period of the loan.

Other effects

  (4)   These effects displace the income tax consequences that would otherwise arise from the arrangement. For example, the notional buyer cannot deduct the actual payments to the notional seller.

Table of sections

Operative provisions

240 - 10   Application of this Division

240 - 15   Scope of Division