The Full Federal Court has unanimously dismissed the taxpayer’s appeal and the Commissioner’s cross appeal from the decision at first instance in Kelly v FCT [2012] FCA 423.
At first instance, the Federal Court found that the assignment of partnership interests under a “Retirement Deed”, to a holding trust for the benefit of the partners’ family trusts, was ineffective in view of the lack of evidence of consideration provided by the trust for the assignment and because a valid assignment of a partnership interest was generally only possible by a continuing partner, and not a retiring partner. However, the Court held that the assignment of a 30% “collective” interest in the partnership was valid in equity due to the clear intention of the partners to assign the collective interest and the payment of consideration by the trust for the assignment.
In unanimously dismissing the taxpayer’s appeal from the decision at first instance, the Full Court found that the Court did not err in finding that the Retirement Deed did not confer upon the holding trust a 20% interest in the partnership for the same reasons that the Court at first instance found. Likewise, the Full Court unanimously dismissed the Commissioner’s cross-appeal on the basis that of a finding that it was open to the primary judge to conclude that the assignment of the 30% collective interest to the holding trust was effective as there was sufficient objective evidence to supported this finding (such as the entries in the general ledger of the partnership, entries in the records of the partnership’s bank and the lodgment of an assessment form under the relevant Duties Act).
(Kelly v FCT [2013] FCAFC 88, Full Federal Court, Lander, Siopis, Gilmour JJ, 8 August 2013.)
[LTN 153, 9/8/13]