A taxpayer, a partner in a partnership of 7 solicitors, has been unsuccessful in arguing that a retiring partner had equitably assigned 20% of his interest in the partnership to a “partnership trust” and that therefore he (and the other partners) was only assessable on something less than 1/7th of the partnership profits in the relevant year. Instead, the Federal Court found the taxpayer had not established the onus of proving that the relevant assessment was excessive and, in particular, that there was insufficient evidence to establish if the interest had been effectively transferred to the trust.
However, the Court held that the assignment of a 30% collective interest was valid in equity due to the clear intent of the partners and the payment of consideration by the trust.
Likewise, the Court held that the taxpayer had satisfied the onus of proving that the assessment was excessive in relation to its finding that a similar trust established by the taxpayers held a 7.8% interest in the partnership.
Finally, the Court sought further submissions on the issue of whether the taxpayer’s discretionary family trust could claim a deduction for superannuation contributions.
(Kelly v FCT [2012] FCA 423, Federal Court, Besanko J, 27 April 2012.)
[LTN 80, 30/4]