A scheme of reconstruction meeting conditions 1,2 and 3 of Sch5AA necessarily involves the transfer of the whole or part of a business, rather than a mere transfer of assets. A controlling holding of shares in a trading subsidiary is treated as being part of a parent company's business (Sch5AA paragraph 4(3)). There may be a problem where the subsidiary is not trading, but only holding investments or property.

Please send a report and your file to Capital Gains Technical Group before you suggest Section 139 does not apply because there is no transfer of a business. Such an argument may not be compatible with accepting there is a scheme of reconstruction.

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