Due to COVID‐19 impact, HI Co becomes insolvent and placed into voluntary liquidation by its
directors. Dissolve liquidators have been appointed as the company liquidators. On the winding up
of the HI Co, Dissolve liquidators have started distributions and Paul as ex‐shareholder of HI Co
received $7,200 from the liquidators, which was inclusive of $3,000 unfranked dividend pursuant to
the provision of Income Tax Assessment Act 1963, section 47(1). This distribution to Paul was from
his $4,000 investment in the shares of HI Co on 2nd February 2019.
With reference to relevant provisions of ITAA 97 and ITAA 36, critically analyze the tax consequences
of the above scenario for Paul. (10 marks, maximum 300 words).
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