Powers of attorney and donor** intention

While strictly a case that was focused on a tax issue (and the ability to access trading losses), the decision in the AAT case Executor for the late Joan E Osborne and Commissioner of Taxation [2014] AATA 128 also provides useful guidance in relation to a related estate planning issue.

In summary:

1. The donor under a power of attorney appointed her niece and nephew to manage a share portfolio.
2. All evidence suggested that the donor treated the portfolio as a capital investment.
3. Over time, the attorneys grew the share portfolio significantly, partly by leveraging the shares through a margin loan.
4. At all times during the profit years, the portfolio was treated for tax purposes as a capital asset (i.e. reflecting the donor’s original intention).
5. When however significant losses were incurred, the attorneys sought to argue that they had been conducting share trading activities and therefore the losses should not be quarantined to only being able to be offset against capital gains.

In denying access to the revenue losses, the AAT confirmed that it was always extremely relevant to consider the actual intention of the donor regardless of whatever intentions the attorneys may personally hold.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Death Cab for Cutie song ‘Styrofoam plates’. View here: