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Edited version of private ruling
Authorisation Number: 1011467513223
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Ruling
Subject: Disposal of assets acquired by a deceased estate
Questions and Answers
Was a capital gain made when the assets were sold by you as trustee?
Yes.
Is any net income from the sale of the assets assessed under section 99 or 99A of the Income Tax Assessment Act 1936 (ITAA 1936)?
No.
This ruling applies for the following period/s:
Year ended 30 June 2008
Year ended 30 June 2009
The scheme commences on:
13 June 2007
Relevant facts and circumstances
Some years ago, the deceased passed away.
Under their will a life tenancy was granted to a person.
The remainder of her estate was to be divided equally between charitable organisations.
All of the charitable organisations are income tax exempt and are deductible gift recipients.
The life tenant passed away some time later.
Probate was granted.
The estate has been fully administered.
The estate comprised jewellery, shares and units, moneys on deposit and a dwelling.
The dwelling was sold.
During the period of the estate the executor and trustee made further investments for the benefit of the beneficiaries.
Some of the assets (shares) owned by the deceased estate prior to the death of the life tenant have been subsequently transferred in specie and to the beneficiaries. The estate made a capital gain on the disposal of the assets.
The income tax return for the relevant year has been lodged by the estate and all capital gains were included in the return.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 97,
Income Tax Assessment Act 1936 Section 99,
Income Tax Assessment Act 1936 Section 99A,
Income Tax Assessment Act 1997 Section 104-75
Income Tax Assessment Act 1997 Section 106-50 and
Income Tax Assessment Act 1997 Section 128-20.
Reasons for decision
The deceased estate acquired assets after the deceased death.
The life tenant was entitled to the income that was derived from these assets.
Upon the death of the life tenant the beneficiaries, the charitable organisations, became absolutely entitled to the assets of the estate.
The estate disposed of the assets and made a capital gain. As the residual beneficiaries were absolutely entitled to the assets, any income, including capital gains, arising on the disposal by the estate is assessable in the hands of the beneficiaries.
As the beneficiaries in this case are charitable organisation who are income tax exempt entities, any capital gain made is not taxable.
Please note: there is no code that necessarily identifies the fact that the beneficiaries are tax exempt. The appropriate code to use is the code that indicates that the trust has distributed to an adult who is not under a legal disability. Therefore either code 30 or 34 would suffice.
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