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Edited version of private ruling
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Ruling
Subject: Capital gains tax - Deceased estate - disposal of main residence
Question
Is the capital gain or capital loss made on the disposal of the property disregarded?
Answer: Yes.
This ruling applies for the following period
Year ended 30 June 2011
Year ended 30 June 2012
The scheme commenced on
1 July 2010
Relevant facts
Prior to 20 September 1985, the deceased acquired a property (the property).
You resided with the deceased prior to their death and continue to reside in the property as your main residence.
The deceased died many years go
You are one of the trustees of the estate as well as a beneficiary.
The deceased's other child is the other trustee and a beneficiary of the estate.
Under the deceased's Will the beneficiaries have the right to occupy the property.
The title of the property has been transferred into the trustee's names as personal representatives under instrument.
The property will be disposed of.
You have provided copies of the following documentation to support your application and these documents are to be read with and forms part of the scheme for the purpose of this ruling:
- the Will, and
- property title.
Relevant legislative provisions
Income Tax Assessment Act Section 104-10
Income Tax Assessment Act Section 118-110
Income Tax Assessment Act Section 118-130
Income Tax Assessment Act Section 128-15
Income Tax Assessment Act Section 118-195
Reasons for decision
The most common capital gains tax (CGT) event is a CGT event A1 which occurs when you dispose of a CGT asset. The time of the event is when you enter into the contract for the disposal or if there is no contract when the change of ownership occurs.
However, there are a number of different exemptions or exceptions that, if they apply, can mean that a capital gain or capital loss that you make as a result of a CGT event can be disregarded, either in full or in part.
For a dwelling acquired by the deceased on or after 20 September 1985, which was the deceased's main residence just before they died and, at that time, was not being used for the purpose of producing assessable income. The executor is entitled to a full exemption if:
- their ownership interest ends within two years of the deceased's death or
- the dwelling was, from the deceased's death until your ownership interest ends the main residence of one or more of:
- the spouse of the deceased immediately before death (except a spouse who was living permanently separately and apart from the deceased)
- an individual who had a right to occupy the dwelling under the deceased's will, or
- an individual beneficiary to whom the ownership interest passed and that person disposed of the dwelling in their capacity as beneficiary.
In this case, a beneficiary who had a right to occupy the property under the deceased's Will has established the property as their main residence and will occupy the property from the deceased's date of death until you as trustee dispose of the property.
Therefore, upon disposal of the property any capital gain or capital loss made is disregarded.
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