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Edited version of your private ruling
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Ruling
Subject: CGT - deceased estate
Questions and Answers
Are you liable for Capital Gains Tax on money received from the sale of the 1/3 share in a property as a tenant in common?
No.
Are you liable for Capital Gains Tax on money received from the sale of the 2/3 share in a property from a deceased estate?
No.
This ruling applies for the following period
1 July 2011 to 30 June 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.
Prior to 20 September 1985 three members of your family purchased a property, as tenants in common, in equal shares.
One of the family members was your parent (parent 1).
Prior to 20 September 1985 you and your other parent (parent 2) purchased a 1/3 share each in the property.
After 1985 parent 1 passed away and parent 2 inherited their 1/3 share of the property.
Some years later parent 2 passed away.
The property was your parent's main residence until their deaths.
The property was not used for the purpose of producing assessable income.
Within two year of parent 2's death settlement occurred for the sale of the property.
You are the executor and beneficiary under parent 2's Will.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 subsection 104-10(5)
Income Tax Assessment Act 1997 Section 118-195
Reasons for decision
Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you can only make a capital gain or capital loss if a Capital Gains Tax (CGT) event happens.
Subsection 104-10(5) of the ITAA 1997 provides that the capital gain or capital loss you make on the disposal of an asset is disregarded if you acquired the asset before 20 September 1985.
Deceased Estate
Section 118-195 of the ITAA 1997 outlines the treatment of dwellings acquired from a deceased estate; it reads as follow:
(1) A capital gain or capital loss you make from a CGT event that happens in relation to a dwelling or your ownership interest in it is disregarded if:
(a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and
(b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied.
Beneficiary or trustee of deceased estate acquiring interest | ||
Item |
One of these items is satisfied |
And also one of these items |
1 |
The deceased acquired the ownership interest on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death and was not then being used for the purpose of producing assessable income |
Your ownership interest ends within 2 years of the deceased's death |
2 |
The deceased acquired the ownership interest before 20 September 1985 |
The dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of: (a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased's will; or (c) if the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary - that individual |
Application to your circumstances
Prior to 20 September 1985 (pre-CGT) you purchased a 1/3 share in a property as a tenant in common. The property has now been sold.
Accordingly, as you purchased the 1/3 share in the property prior to CGT any capital loss or gain is disregarded.
1/3 share in the property parent 2 purchased
Parent 2 purchased a 1/3 share in the property prior to 20 September 1985 and it is exempt because the property was sold within two years
1/3 share in the property parent 2 inherited from parent 1
Parent 2 acquired the ownership interest in the 1/3 share of the property on or after 20 September 1985 (post-CGT), the dwelling was the parent 2's main residence just before their death and it was not being used for the purpose of producing assessable income.
Accordingly the 1/3 share interest is exempt because the property was sold within two years of parent 2's death.
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