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Assets which pass to the beneficiary or legal personal representative

Last updated 30 August 2010

Main residence

Special rules apply if the asset was the person's main residence (see Inherited main residence).

Other assets

The only capital gain or capital loss that is disregarded relates to an asset the person held when they died and which passes under a will or on intestacy to a legal personal representative or beneficiary.

The special rule that disregards a capital gain or capital loss in certain circumstances depends on whether death occurred before, on or after 20 September 1985.

In administering and winding up a deceased estate, a legal personal representative may need to dispose of some or all of the assets of the estate. Assets disposed of in this way are subject to the normal rules, and any capital gain the legal personal representative makes on the disposal is subject to capital gains tax.

Similarly, it may be necessary for the legal personal representative to acquire an asset (for example, to satisfy a specific legacy made). Any capital gain or capital loss they make on disposal of that asset is subject to the normal capital gains tax rules.

If a beneficiary sells an asset they have inherited, the normal capital gains tax rules also apply.

Death before 20 September 1985

If a person died before 20 September 1985, their beneficiary (or the legal personal representative) is taken to have acquired the asset on the date of their death.

Death on or after 20 September 1985

If a person died on or after 20 September 1985, a beneficiary (or the legal personal representative) needs to know the following information before they can calculate any capital gain or capital loss when a later CGT event happens (for example, if you sell the asset as a beneficiary of an estate).

Assets acquired before 20 September 1985

If a person acquired their asset before 20 September 1985 and you become their beneficiary (or the legal personal representative), you are taken to have acquired the asset on the day the person died.

The first element of the cost base or reduced cost base (that is, the amount taken to have been paid for the asset) is the market value of the asset on the day the person died.

If, before they died, a person made a major improvement to a pre-CGT asset on or after 20 September 1985, the improvement is not treated as a separate asset.

The beneficiary or legal personal representative is taken to have acquired the improved asset when the person died. Although the deceased used to treat the asset and the improvement as separate assets, the beneficiary or legal personal representative now treats them as one asset.

Assets acquired on or after 20 September 1985

If a person acquired their asset on or after 20 September 1985 and you become a beneficiary (or the legal personal representative) of their deceased estate, you are taken to have acquired the asset on the day the person died.

The first element of your cost base or reduced cost base is taken to be the cost base (indexed where relevant) or reduced cost base of the asset on the day the person died.

Expenditure incurred by a legal personal representative

As a beneficiary, you can include in your cost base (or reduced cost base) any expenditure the legal personal representative (for example the executor) would have been able to include in their cost base if they had sold the asset instead of distributing it to you. You can include the expenditure on the date they incurred it.

QC16195