Carry forward loss, or offset with gain?

Hi all,

My 80+ year old parents held ZFX + OXR. It appears they will be forced to realise a considerable loss on the merged OZL in the current FY. Assuming the sale to Minmetals proceeds, I recommend selling a small parcel (~5%) of their XYZ holding, sufficent to equal the loss. XYZ has been held for 2 decades and consequently embodies a serious CGT liability. Their portfolio is overweight in XYZ.

There are two reasons for my recommendedation: the "value" of the loss is eroded with inflation; and a carried the loss forward risks lapsing (if I were to lose a parent).

Is my reasoning sound?

 

No reply

Hi all,

118 views and 0 replies. Did I word my question poorly, post in the wrong forum, or what? Surely the situation I described is not unique. Does no one on the forum have an opionion?

 

Hi Robert,

Your latest post brought this to the top of the pile.

I cannot comment on financials, but you are correct that CGT taxes inflation and your capital losses die with you normally.

Provided your choice to realise a CGT asset to offset a capital loss does not fall foul of Part IVA anti-avoidance provisions, then it is OK if sold to an unrelated party. Portfolio rebalancing is perfectly valid reason normally.

Shame your parents are too old to make SMSF in-specie contributions of the XYZ if they think it is a good long term hold.

Cheers,

Rob

 

Hi Rob,

I'm happy to announce that I have just set up a DFT, so XYZ (a great long term hold)will remain in the family by gift from my dear parents. Mr market won't even get a look in. Which brings another question, I'll title "off market transfer".

Cheers, Robert

 

The only concern is whether the trust is a related party so that your parents retain the benefit of the shares whilst realising a loss for CGT purposes.

Check out TR 2008/1 "Wash Sales".

Cheers,

Rob

 

Hi Rob,

We were careful to not mention Mum and Dad anywhere in the deed. They neither control nor benefit from the trust. While related (genetically) they are legally quite unrelated to the trust, I trust.