ATO Interpretative Decision
ATO ID 2003/1115 (Withdrawn)
Income Tax
Capital gains tax: CGT event E6 - deceased estate: surrender of life interest in trustFOI status: may be released
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This ATO ID has been withdrawn as the ATO view on this matter now appears in TR 2005/D14This document incorporates revisions made since original publication.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Does CGT event E6 in section 104-80 of the Income Tax Assessment Act 1997 (ITAA 1997) happen if the trustee of a testamentary trust transfers to an income beneficiary of the trust, an estate of freehold for life in a property owned by a deceased person?
Decision
No. Because the land was owned by the deceased person, the exception in subsection 104-80(1) of the ITAA 1997 will apply and CGT event E6 will not happen.
Facts
An individual acquired an interest in a property before 20 September 1985. The individual died during the 1996 income year.
The will of the deceased individual provided that the property was to be held upon trust to pay income to their spouse (the taxpayer) for life with the remainder to their two children.
It is proposed to bring the trust to an end. The trustees of the testamentary trust will transfer an estate of freehold for life to the taxpayer and an estate in remainder to the two children.
Reasons for Decision
CGT event E6 in section 104-80 of the ITAA 1997 happens if the trustee of a trust disposes of a CGT asset of the trust to a beneficiary in satisfaction of the beneficiary's right, or part of it, to receive income from the trust. If CGT event E6 happens there are consequences for the trustee and the beneficiary of the trust.
There is an exception if the trust is a trust of an asset to which Division 128 of the ITAA 1997 applies. That is, CGT event E6 will not happen if the asset transferred by the trustee was owned by the deceased individual at the time they died.
Although the deceased did not separately own the life interest which is being transferred to the taxpayer, it formed part of their total ownership interests in the land and accordingly CGT event E6 will not happen when an estate of freehold for life in the property is transferred to the taxpayer. This is consistent with the approach that would be adopted if an asset owned by a person passed to two or more beneficiaries as tenants in common.
Date of decision: 13 November 2003Year of income: year ended 30 June 2004
Legislative References:
Income Tax Assessment Act 1997
section 104-80
subsection 104-80(1)
Division 128
Related Public Rulings (including Determinations)
Taxation Determination TD 1999/76
Taxation Determination TD 1999/82
ATO ID 2003/108
ATO ID 2003/470
Keywords
CGT events E1 -E9 - trusts
CGT exemptions
CGT cost base
ISSN: 1445-2782
| Date: | Version: | |
| 13 November 2003 | Original statement | |
| You are here | 28 September 2005 | Archived |