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Edited version of your private ruling
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Ruling
Subject: Capital gains tax - deceased estate
Question
Will any capital gain from the disposal of the property by the executor be disregarded on the basis of the property being acquired prior to 20 September 1985?
Answer
No
This ruling applies for the following periods:
Year ending 30 June 2012
Year ending 30 June 2013
The scheme commences on:
1 July 2011
Relevant facts and circumstances
The deceased died in 2011.
The deceased owned a property. The property was inherited from their late spouse in after 1 July 1991.
The property was initially purchased by the deceased's late spouse in after 1 July 1964.
The property was used in a business that was run by a partnership. The deceased and their spouse were partners in this partnership.
The payment for the property and the ongoing costs such as rates and maintenance were met jointly by the deceased and their late spouse.
The income from the business was also jointly distributed between the deceased and their spouse.
For unknown reasons the title of the property was only in the deceased's late spouse's name and it was transferred to the deceased on their passing.
You are the executor of the estate and are required to sell the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 128
Income Tax Assessment Act 1997 Subsection 128-15(2)
Income Tax Assessment Act 1997 Paragraph 104-10(5)(a)
Reasons for decision
Under Division 128 of the Income Tax Assessment Act 1997 (ITAA 1997) when a person dies a capital gain or capital loss from a CGT event that results from a CGT asset the person owned just before dying is disregarded. In accordance with subsection 128-15(2) of the ITAA 1997, a legal personal representative (LPR) or a beneficiary is taken to have acquired the asset on the day the deceased died. Any subsequent disposal by the LPR or beneficiary is a CGT event which will result in a capital gain or loss.
A capital gain on the disposal of an asset can be disregarded under paragraph 104-10(5)(a) of the ITAA 1997 if it was acquired prior to 20 September 1985.
The fact that the property expenses were paid jointly by the deceased and their spouse does not change the post-CGT status of the property in your hands as the LPR. The property could only be a pre-CGT asset in your hands if the deceased died before 20 September 1985.
As the LPR, you are taken to have acquired the property after 1 July 2010 on the deceased's date of death. Accordingly, any capital gain made on the disposal of the property cannot be disregarded under paragraph 104-10(5)(a) of the ITAA 1997.
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