If the deceased was not living in the home at the date of their death, they or their trustee may have chosen to continue to treat it as their main residence. You may need to contact the trustee or the deceased's tax adviser to find out whether this choice was made. If it was, the dwelling can still be regarded as the deceased's main residence:
- for an indefinite period – if the dwelling was not used to produce income after the deceased stopped living in it, or
- for a maximum of six years after they ceased living in it – if it was used to produce income after they ceased living in it.
Example – Continuing main residence status
Aldo bought a house in March 1995 and lived in it.
He moved into a nursing home in December 1998 and left the house vacant. He chose to treat the house as his main residence after he ceased living in it under the 'continuing main residence status after dwelling ceases to be your main residence' rule.
Aldo died in February 2004 and the house passed to his beneficiary, Con who uses the house as a rental property.
As the house was Aldo's main residence immediately before his death and was not being used to produce income at that time, Con can get a full exemption for the period Aldo owned it.
If Con rented out the house and sold it more than two years after Aldo's death, the capital gain for the period from the date of Aldo's death until Con sold it is taxable.
If Con had sold the house within two years of Aldo's death, he could have ignored the main residence days and total days between Aldo's death and him selling it - which would have given him exemption for this period.
If Aldo had rented out the house after he ceased living in it he could choose to continue to treat it as his main residence (see Continuing main residence status after dwelling ceases to be your main residence). The house would be considered to be his main residence until his death because he rented it out for less than six years.
If this choice had been made, Con would get an exemption for the period Aldo owned the house.End of example
For more information about deceased estates, see chapter 9.