Section DV 24 — Income Tax Act 2007: Losses for QCs becoming sole traderships

DV 24 Losses for QCs becoming sole traderships When this section applies (1) This section applies to a person when,–– (a) for an income year, the person's sole tradership has effectively replaced a qualifying company under a QCST transitional process; and (b) ignoring the application of section HZ 4D(3) (Qualifying companies: transition into sole traderships), the company would have had a loss balance to carry forward to the first or second income year, as applicable, starting on or after 1 April 2011 (the relevant transitional income year ). Losses extinguished (2) Despite section HZ 4D(3) , for the relevant transitional income year and subsequent income years, a loss balance under Part I (Treatment of tax losses) is cancelled if the loss balance arose in relation to an income year before the relevant transitional income year. Deduction (3) The person is allowed a deduction for an amount equal to an amount given by the formula in subsection (4). Deduction formula (4) For the purposes of subsection (3), the amount is calculated using the following formula: loss balance extinguished − subsequent deductions. Definition of items in formula (5) In the formula,–– (a) loss balance extinguished is the loss balance cancelled under subsection (2): (b) subsequent deductions is the total amount of deductions allowed for previous income years under this section. Exception (6) Despite subsection (3), a person is denied a deduction for an amount in subsection (4) to the extent to which–– (a) it arises from an amount carried forward under subparts IA and IQ (which relate to the treatment of foreign losses); and (b) it is greater than the maximum amount they may subtract from their net income under subpart IQ , treating the amount as an attributed CFC net loss or a FIF net loss carried forward under subpart IQ. Link with subpart DA (7) This section overrides the general permission and the general limitations. Defined in this Act: amount , attributed CFC net loss , deduction , FIF net loss , general limitation , general permission , income , income year , loss balance , net income , QCST transitional process , qualifying company Section DV 24: added, on 1 April 2011 (applying for income years beginning on or after 1 April 2011), by section 45(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).