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What about direct value shifting?Print This Post

What about direct value shifting?

Business Succession Update – Spring 2013
Division 725 (direct value shifting) only has consequences for dividend access shares if an interest loses value (a down interest) of at least $150,000. See s725-70.

Beyond this, for there to be a value shift, some shares must lose value and others gain it. Using the language of s725-145(3), there must be a contemporaneous increase in value of one or more equity interests in the entity. But the mere creation of the dividend access shares cannot creates a value shift because any dividend is dependent upon the directors declaring one.

Moreover, if the constitution of the company allows the directors to cancel a dividend which has been declared but not paid, then there can be no increase in value of the dividend access share or decrease in value of the other shares between the time of the declaration of the dividend and the time of payment of the dividend. Again, a difficult problem and an easy solution.

Dividend access shares have other issues to contend with including Part IVA and s 177E (dividend stripping), Division 7A, and Division 974 (the debt equity rules).

Providing the structure is simple and TA 2012/4 is borne in mind, the provision of dividend access shares remains part of the armory of business succession advisors.