Tax Commissioner Michael DAscenzo today issued a taxpayer alert warning people to be cautious about certain wash sale arrangements to reduce capital gains or claim deductions.
Wash sale arrangements dispose of an asset, generally shares, with the intention to generate a capital loss.
Subsequently, the same or substantially the same asset is then acquired.
The Tax Office is not concerned with the genuine disposal of an asset at market value.
In certain circumstances we may determine that wash sale arrangements are schemes to reduce income tax, Tax Commissioner Michael DAscenzo said.
"I want to remind anyone who may be considering using wash sale arrangements to reduce their next tax bill that significant penalties can apply.
Anyone who is uncertain about their deduction entitlements should seek independent tax advice or request a private ruling from us.
"People who have already claimed deductions for any losses they incur under these arrangements should consider telling us so we can help them sort out their situation.
If people come to us before we contact them for an audit, they may be entitled to reduced penalties. (LOL, I wonder how many people are brave enough to do that?)
Entities marketing such schemes should also be careful as they could contravene the promoter penalty laws, Mr DAscenzo said.
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