Tuesday, May 9, 2017

Murphy’s Lew

As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’ at the following link - https://youtu.be/SSpp06IM5j4

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
The case study here is a relatively famous case, or at least a case about a relatively famous person, being Solomon Lew, the high profile retailer.

The factual scenario involved a relatively standard family trust.

The initial catalyst for the difficulties was the so-called ‘entity taxation regime'. Under these rules, the idea was to effectively tax trusts as if they were companies.

Mr Lew received some strategic tax advice.

The strategic advice was to do this.

The first step was that the trust entered into an arrangement where an asset revaluation was done.

This basically uplifted the carrying value of all of the assets of the trust to market value and created a big gap, a dollar gap between the carrying cost and the actual market value. That ‘notional gain' was distributed as a capital distribution, down to relevantly one of the sons and one of the daughters of Mr and Mrs Lew, and their respective spouses.

Fast forward about 5 or 6 years, the relationships of both of the kids with their respective spouses ended at about the same point in time.

The former spouses and their lawyers looked at the documentation and argued based on the accounts, the amounts were at call loans made to the trust.

The Lews’ argued that the amounts were in fact gifted back into the trust.

If it was a loan, then that would have to be immediately repaid down into each couple’s hands and then those would immediately form part of the matrimonial pool.

Unfortunately, what the ‘correct' answer was is unknown because the matter settled out of court. In some respects however, it doesn’t even matter what the answer was.

The key point is that no one actually thought about the documentation with a lot of clarity.
The title of this post is a play on Murphy’s Law, which is an adage or epigram that is generally quoted as 'anything that can go wrong, will go wrong'.

Murphy’s Law is profiled together with over 100 other adages in my recently released business book 'Laws for Life'.

A link to your (free!) copy of this book is below -


Password: laws4life

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Separately, many of the themes in this post will be featured in our upcoming half and full day Estate Planning Roadshow being held in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Download the brochure here.

Watch the promo video below.