COLGAN & COLGAN

The parties in this matter were the applicants, Mr and Mrs Colgan, and the respondent, the Commissioner of Taxation. The dispute concerned the Commissioner's assessment of income tax against the Colgans for the 2015 income year. The matter came before Stevenson J of the Federal Court of Australia.

The primary legal issue before the Court was whether the Commissioner had correctly determined that the Colgans were not entitled to a deduction for a capital loss arising from the sale of shares in a company, Colgan Holdings Pty Ltd. This, in turn, required the Court to consider whether the shares were held on revenue account or capital account, and whether the loss was a capital loss or a revenue loss.

Stevenson J reasoned that the nature of the asset (shares) and the intention of the taxpayer at the time of acquisition are critical in determining whether it is held on revenue or capital account. His Honour applied the principles established in cases such as *FC of T v Whitfords Beach Pty Ltd* and *Guzman v FC of T*, which distinguish between profit-making schemes entered into in the course of a business (revenue) and the realisation of an investment (capital). In this instance, Stevenson J found that the shares were acquired as an investment and were therefore on capital account. Consequently, the loss on their sale was a capital loss and not deductible.

The Court therefore dismissed the Colgans' application for review and affirmed the Commissioner's assessment.