ATO Interpretative Decision
ATO ID 2001/733
Income Tax
CGT- Deceased Estate - Cost base of CGT asset - Action for negligence in drafting the WillFOI status: may be released
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This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Do legal costs incurred by the executor of a deceased estate in defending a claim alleging negligence in drawing up the Will of another family member of the deceased and also defending an action to remove them as trustee of another family member's estate, form part of the cost base of the estate's assets pursuant to subsection 110-25(6) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. These legal costs do not form part of the cost base of the assets of the deceased under subsection 110-25(6) of the ITAA 1997. However, they may form part of the cost base of assets of the other deceased estate.
Facts
The taxpayer is the executor of a deceased estate.
The taxpayer, in their capacity as solicitor for the late taxpayer's family, also performed other duties, including action as executor for the estates of other deceased family members.
While acting as executor of the estates of the other family members they defended a claim they were negligent in the drawing up of another's will and also another action seeking to remove them as a trustee of the other estate concerned.
Reasons for Decision
These expenditures have not been incurred by the taxpayer in their capacity as the executor of the deceased estate in question. Hence, as the 'legal personal representative' of this deceased estate, they can not include them in the cost base of it's estate's assets pursuant to subsection 110-25(6) of the ITAA 1997. The expenditure may however fall for consideration as part of the costs base of the assets of the estate of the other family member subject to the legal action.
Date of decision: 27 September 2001
Legislative References:
Income Tax Assessment Act 1997
Subsection 110-25(6)
ATO ID 2001/729
ATO ID 2001/730
ATO ID 2001/731
ATO ID 2001/732
ATO ID 2001/734
ATO ID 2003/1048
Keywords
Capital gains tax
Capital gains
CGT asset issues
CGT cost base
Parties to actions
Present entitlement
Legal title
CGT deceased estates
Capital Gains Tax CoE
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 27 September 2001 | Original statement |
| 27 July 2007 | Archived |