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Edited version of private ruling
Authorisation Number: 1011502244772
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Ruling
Subject: Capital gains tax - deceased estate
Questions and answers:
Can you disregard the capital gain you make on the sale of a property, where the property was acquired before 20 September 1985 and sold by the executor after the life tenant's death?
No.
Are you entitled to a partial main residence exemption on any capital gain you make on the sale of the property?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2010
Year ending 30 June 2011
Year ending 30 June 2012
The scheme commenced on:
1 July 2009
Relevant facts and circumstances
The deceased acquired the property in question prior to 20 September 1985.
The deceased died after 20 September 1985.
The deceased's widow was granted the estate.
The deceased's child made a claim under the testator's family and maintenance provisions and this claim was resolved by an agreement under seal between the deceased's and the deceased's child.
Under the agreement, the deceased's widow was to have exclusive occupation of the dwelling during their lifetime. Upon the deceased's widow's death, the deceased's child would be entitled to one-third of the estate.
The deceased's widow died.
You are the trustee of the estate.
You intend to sell the property within two years of the date of the deceased's widow's death.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-195.
Income Tax Assessment Act 1997 Section 118-200.
Reasons for decision
Section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) allows the trustee of a deceased estate to disregard any capital gain or loss made from a CGT event that happens in relation to a dwelling that a deceased person acquired before 20 September 1985 if:
- the trustee's ownership interest ends within 2 years of the deceased's death, or
- from the deceased's death until the trustee's 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; or
- an individual who had a right to occupy the dwelling under the deceased's will; or
- an individual who brought about the CGT event where the ownership interest in the dwelling passed to that same individual as beneficiary.
Item (1) does not apply as your ownership interest did not end within two years of the deceased's death.
Items (2)(a) and (2)(b) do not apply because the dwelling ceased to be the deceased's widow's main residence when she died, which was prior to your ownership interest ending.
Item (2)(c) does not apply as you are selling the property in your capacity as trustee.
Therefore, because none of the items in section 118-195 of the ITAA 1997 apply in your case, you cannot disregard any capital gain or loss you make in relation to the property when your ownership interest ends.
You may, however, be entitled to a partial main residence exemption, if you meet the requirements of section 118-200 of the ITAA 1997.
A partial main residence exemption is available under section 118-200 of the ITAA 1997 where:
- you are an individual and your ownership interest in a dwelling passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and
- section 118-195 does not apply.
This exemption is available to you because you own the property as the trustee of the deceased estate and, as discussed above, section 118-195 of the ITAA 1997 does not apply.
Section 118-200 of the ITAA 1997 sets out the formula to use when calculating your capital gain or capital loss:
CG or CL amount x Non-main residence days
Total days
Where:
"CG or CL amount" is the capital gain or capital loss you would have made from the CGT event.
"Non-main residence days" is the number of days in the period from the death until your ownership interest ends when the dwelling was not the main residence of an individual referred to in item 2, column 3 of the table in section 118-195.
"Total days" is the number of days from when the deceased died, to the date your ownership interest ends.
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