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Taxation Ruling
TR 96/4
Income tax: valuing shares acquired as revenue assets

17. Where a taxpayer cannot identify shares either individually or by reference to share certificates, and the taxpayer does not maintain accounting records as outlined in this Ruling, the taxpayer cannot, for taxation purposes, specifically identify shares appropriated to a particular sale. Accordingly, the taxpayer is required to use the first in first out («FIFO») method to determine the cost price of those shares.

21. If shares held by a taxpayer as trading stock on hand at the end of a year of income can be identified and the taxpayer values the shares at cost price under subsection 31(1), the actual cost of the shares must be ascertained.

Where a taxpayer is able to identify shares individually or by reference to share certificates, or maintains appropriate accounting records, as outlined earlier in this Ruling, that will be regarded as sufficient identification of the shares for the purpose of determining the cost price of shares on hand at the end of a year of income.

On the other hand, where a taxpayer is unable to specifically identify what shares are actually on hand at the end of the year of income, the taxpayer will be required to use either the «FIFO» method or the average cost method (where average cost is an acceptable method) to determine the cost price of those shares for the purposes of subsection 31(1)

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CGT Determination Number 33
TD 33

Capital Gains: How do you identify individual shares within a holding of identical shares?

3. In these circumstances, the taxpayer will need to decide which particular shares are being disposed of. Taxpayers in this situation will need to keep adequate records of the transaction so that the decision can be supported should the income tax return be subject to Tax Office scrutiny at a later date.

4. In the past, where unidentifiable shares have been disposed of, the Commissioner has accepted ‘first-in first-out’ as a reasonable basis of identification. For CGT purposes, the Commissioner will also accept the taxpayer’s selection of the identity of shares disposed of.




	
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