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Edited version of your private ruling
Authorisation Number: 1012169767297
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Ruling
Subject: capital gains tax - deceased estate - property acquired prior to 20 September 1985
Question: Is the capital gain or capital loss made on the disposal of the farm which you acquired as a beneficiary of a deceased estate disregarded?
Answer:
Yes.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The deceased (deceased A) acquired a number of farms which comprised of:
1. property A
2. property B
3. property C and
4. property D.
In the early 1970's deceased A died.
Under the deceased A's will and codicil their spouse had a life interest in the farm and upon their death your spouse (deceased B), had absolute ownership of property B.
Probate was granted on early 1970's by the Probate Court of an Australian State
Mid 1970's deceased B died predeceasing the life tenant.
Under deceased B's will you are sole executor and sole beneficiary of their estate.
Probate was granted on mid 1970's by the Supreme Court of an Australian State.
In the late 1990's deceased A's spouse died.
The following year you became the registered owner of property B.
You will dispose of property B.
You have provided a copy of documentation to support your application and these documents are to be read with and forms part of your application for the purpose of this ruling.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 128-15
Income Tax Assessment Act 1997 Section 128-10
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Generally, you can disregard any capital gain or capital loss you make on a capital gains tax (CGT) asset you acquired before 20 September 1985 (pre CGT).
The most common CGT event, CGT event A1 which occurs when you dispose of a CGT asset and the time of the event is when you enter into the contract for the disposal or if there is no contract when change of ownership occurs.
CGT event A1 will occur upon the disposal of property B.
Deceased estate
If you acquire an asset owned by a deceased person as their executor or beneficiary, you are taken to have acquired the asset on the day the person died.
Property B was acquired by deceased B on deceased A's date of death.
Upon the death of deceased B you acquired property B as this formed part of their estate, on their date of death.
The death of the life interest owner has no CGT consequences for the remainder (beneficiary) owners. The remainder owners do not acquire any asset from the life interest owner, their existing interest is merely enlarged.
The remaindermen's position
As stated above, the remaindermen (beneficiaries) are taken to have acquired the dwelling on the deceased's date of death. The trigger event for this acquisition is normally the death of the life tenant.
In your situation, the trigger event was the death of deceased A's spouse. That is, once the interest of the life tenant is extinguished or forfeited, no matter how this is done, the remaindermen are taken or deemed to have acquired their interest in the asset on the original deceased's date of death.
In your case, you are taken to have acquired the property B on the date deceased B died which was before 20 September 1985, being a pre-CGT asset.
Therefore, upon disposal of the property B any capital gain or capital loss made on its disposal is disregarded.
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