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Edited version of private ruling
Authorisation Number: 1011433457621
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Ruling
Subject: capital gains tax and deceased estate - disposal of dwelling
Question:
Is any capital gain or loss made upon disposal of the dwelling disregarded?
Answer: Yes.
This ruling applies for the following period:
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts and circumstances
The deceased died after 20 September 1985 leaving a Will dated the year before their death.
Probate was granted in the year of death.
The deceased's dwelling was valued in the probate application.
The dwelling was purchased by the deceased and their spouse. The transfer of land was dated before 20 September 1985. Title to the dwelling was registered before 20 September 1985. The dwelling was their main residence until their respective deaths.
The spouse died after 20 September 1985 and the dwelling was transferred by survivorship to the deceased. The change of titled was registered after 20 September 1985.
Upon death of the deceased, the title was transferred into the names of the executors, A, B, C and D in the year of death.
a clause of the Will provides beneficiary A the right to reside in the dwelling. The right ceases if certain events occur, being their death; they no longer wish to use the dwelling as their residence; or the first to happen a set number of years from the date of grant of probate in respect of the Will or when the grandchild ceases full time secondary school education. The grandchild will remain in full time secondary school for several more years.
When the dwelling is sold, the proceeds will be distributed as part of the residuary estate detailed in another of the Will.
Beneficiary A exercised the right to reside in the dwelling. The dwelling is their main residence.
The right to reside will terminate when the dwelling is sold.
The auction for the dwelling was scheduled. The dwelling was taken off the market prior to the auction.
The dwelling is to be sold as beneficiary A no longer wishes to use the dwelling as their main residence.
Beneficiary A will reside in the dwelling as their main residence until the property is disposed of.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10,
Income Tax Assessment Act 1997 Section 118-110,
Income Tax Assessment Act 1997 Section 118-130,
Income Tax Assessment Act 1997 Section 128-20 and
Income Tax Assessment Act 1997 Section 118-195.
Reasons for decision
A capital gain or capital loss that either a beneficiary or legal personal representative (LPR) makes on the disposal of a dwelling that was the deceased's main residence just before they died is disregarded if:
· the beneficiary or LPR disposed of their ownership interest within 2 years of the deceased's death; or
· from the deceased's date of death until the ownership interest ends the dwelling was the main residence of one or more of the following persons:
- the spouse of the deceased immediately before death;
- an individual who had a right to occupy the dwelling under the deceased's Will; or
- the individual who brought about the CGT event and the ownership interest in the dwelling had passed to that individual.
In your situation, the deceased resided in the dwelling as their main residence until the date of their death. Beneficiary A, as an individual who had a right to occupy the dwelling under the deceased's Will, resided in the dwelling from the date of death. The dwelling has been beneficiary A's main residence for the entire period that they have had the right to reside in the dwelling. Beneficiary A will vacate the dwelling when the property is sold. Upon disposal of the dwelling, any capital gain or capital loss is disregarded.
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