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Edited version of your private ruling
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Ruling
Subject: Deceased estate - redistribution of the corpus
Questions and answers
Will there be a CGT event when the property is transferred to the notional estate?
No
Will there be a CGT event when the notional estate sells the property to a third party?
Yes
This ruling applies for the following period
Financial year ended 30 June 2013
Financial year ended 30 June 2014
Financial year ended 30 June 2015
Financial year ended 30 June 2016
The scheme commenced on
1 July 2012
Relevant facts and circumstances
The Late parents adopted children.
They also fostered state wards.
The Late Parents lived in and owned their home as joint tenants (The Property). The home was purchased before 20 September 1985.
One parent passed away after September 1985, The Property passed to the joint tenant under the rule of survivorship.
The other parent died without having made a Will.
Letters of administration were granted in the Supreme Court to the adopted children for the Estate of the Late Parent.
They were made beneficiaries of the Estate of The Late Parent.
The Property was transferred as tenants in common into the names of the children, first as administrators of the estate, then as beneficiaries of the estate.
An intention to make a family provision claim under the Family Provision Act 1982 (NSW) was expressed by The Claimant to the beneficiaries. By this time, the Estate of the Late no longer had any assets as they were distributed to the beneficiaries.
As the property is now owned by the Beneficiaries, the Property being contested will be known as the "notional estate".
The Court will order the title of the property to be transferred to the notional estate, from where it will be sold.
Relevant legislative provisions
Income Tax Assessment Act 1997
Section 104-10
Section 118-195
Section 118-210
Section 128-20
Reasons for decision
Capital gains
The disposal of the property constitutes a CGT event A1 as outlined in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997). Your capital gain or capital loss is calculated by subtracting the cost base of the dwelling from the capital proceeds received from its sale.
Arrangement to vary terms of deceased's will
The exemption for the disposal of inherited dwellings (or interests in them) only applies where an interest in a dwelling passes to a beneficiary under the deceased's will in the ways set out in section 128-20 of the ITAA 1997(or in accordance with the requirement for the trustee to acquire a dwelling for occupation by a beneficiary under section 118-210 of the ITAA 1997).
Section 128-20 of the ITAA 1997 provides that a beneficiary acquires an interest in an asset of a deceased estate if the taxpayer's interest is acquired:
(a) under the will of a deceased person;
(b) under such a will as varied by a court order;
(c) by operation of law as a result of the intestacy of a deceased person;
(d) by operation of law as a result of such an intestacy, as the operation of the law is varied by an order of a court; and
(e) because it is appropriated to the taxpayer by the deceased's legal personal representative in satisfaction of a pecuniary legacy or some other interest or share in the estate.
In addition, an interest in an asset of a deceased estate can be acquired under a deed of arrangement if the beneficiary entered into the deed to settle a claim to participate in the distribution of the estate and any consideration given by the beneficiary for the asset consisted only of the variation or waiver of a claim to one or more other CGT assets that formed part of the estate.
The property will be acquired by the notional estate at the date of the Late parent's death under 128-20(d) as the transfer is under a Court order.
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