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PART VII
Anti-Avoidance
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Connected persons.
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33.—(1) This section shall apply where a person acquires an asset and the person making the disposal is connected with him.
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(2) Without prejudice to the generality of section 9, the person acquiring the asset and the person making the disposal shall be treated as parties to a transaction otherwise than by way of a bargain made at arm's length.
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(3) If on the disposal a loss accrues to the person making the disposal, it shall not be deductible except from a chargeable gain accruing to him on some other disposal of an asset to the person acquiring the asset mentioned in subsection (1), being a disposal made at a time when they are connected persons:
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Provided that this subsection shall not apply to a disposal by way of gift in settlement if the gift and the income from it is wholly or primarily applicable for educational, cultural or recreational purposes, and the persons benefiting from the application for those purposes are confined to members of an association of persons for whose benefit the gift was made, not being persons all or most of whom are connected persons.
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(4) Where the asset mentioned in subsection (1) is an option to enter into a sale or other transaction given by the person making the disposal, a loss accruing to the person acquiring the asset shall not be an allowable loss unless it accrues on a disposal of the option at arm's length to a person who is not connected with him.
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(5) In a case where the asset mentioned in subsection (1) is subject to any right or restriction enforceable by the person making the disposal, or by a person connected with him, then (the amount of the consideration for the acquisition being, in accordance with subsection (2), deemed to be equal to the market value of the asset) that market value shall be—
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(a) what its market value would be if not subject to the right or restriction, as reduced by—
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(b) the market value of the right or restriction or the amount by which its extinction would enhance the value of the asset to its owner, whichever is the less:
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Provided that if the right or restriction—
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(i) is of such a nature that its enforcement would or might effectively destroy or substantially impair the value of the asset without bringing any countervailing advantage either to the person making the disposal or a person connected with him,
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(ii) is an option or other right to acquire the asset, or
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(iii) in the case of incorporeal property, is a right to extinguish the asset in the hands of the person giving the consideration by forfeiture or merger or otherwise,
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that market value of the asset shall be determined, and the amount of the gain accruing on the disposal shall be computed, as if the right or restriction did not exist.
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(6) Subsection (5) shall not apply to a right of forfeiture or other right exercisable on breach of a covenant contained in a lease of land or other property, and shall not apply to any right or restriction under a mortgage or other charge.
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(7) Any question whether a person is connected with another shall be determined in accordance with the following provisions (any provision that one person is connected with another being taken to mean that they are connected with one another)—
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(a) a person is connected with an individual if that person is the individual's husband or wife, or is a relative, or the husband or wife of a relative, of the individual or of the individual's husband or wife;
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(b) a person, in his capacity as trustee of a settlement, is connected with any individual who in relation to the settlement is a settlor, with any person who is connected with such an individual and with a body corporate which is deemed to be connected with that settlement, and a body corporate shall be deemed to be connected with a settlement in any year if at any time in the year it is a controlled company (or only not a controlled company because it is not resident in the State) and the shareholders then include the trustees of or a beneficiary under the settlement;
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(c) except in relation to acquisitions or disposals of partnership assets pursuant to bona fide commercial arrangements, a person is connected with any person with whom he is in partnership, and with the husband or wife or a relative of any individual with whom he is in partnership;
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(d) a company is connected with another company—
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(i) if the same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him, have control of the other, or
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(ii) if a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by one or more persons with whom he is connected;
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(e) a company is connected with another person, if that person has control of it or if that person and persons connected with him together have control of it;
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(f) any two or more persons acting together to secure or exercise control of or to acquire a holding in a company shall be treated in relation to that company as connected with one another and with any person acting on the direction of any of them to secure or exercise control of or to acquire a holding in the company.
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(8) In subsection (7) “relative” means brother, sister, uncle, aunt, niece, nephew, ancestor, lineal descendant, or a person adopted under the Adoption Acts, 1952 to 1974, or under the law of any place outside the State.
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