1012422469034 | Legal database

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Authorisation Number: 1012422469034

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Ruling

Subject: Decease - cost base

Questions and answers:

Is the first element of the cost base of your inherited shares the market value as at the date of the deceased's death if the shares were acquired by the deceased before 20 September 1985?

Yes.

Is the first element of the cost base of your inherited shares the market value as at the date of the deceased's death if the shares were acquired by the deceased after 20 September 1985?

No.

This ruling applies for the following period:

Year ended 30 June 2013

The scheme commenced on:

1 July 2012

Relevant facts

Your parent passed away.

As a result of your parent's passing you inherited a share portfolio which contained ASX listed companies.

The portfolio consist of shares that were acquired both pre 20 September 1985 and post September 1985, by the deceased.

You are intending to dispose of a portion the shares.

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 128-10

Income Tax Assessment Act 1997 Section 128-15

Reasons for decision

Under section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997), you make a capital gain or capital loss as a result of a capital gains tax (CGT) event happening to a CGT asset. Under section 104-10 of the ITAA 1997 shares in an ASX listed company are CGT assets

Under section 102-20 of the ITAA 1997, you make a capital gain if the capital proceeds from the disposal are more than the assets cost base. You make a capital loss if the capital proceeds are less than the assets reduced cost base.

Cost base

Section 110-25 of the ITAA 1997 provides that the cost base of a CGT asset is made up of five elements. Subsection 110-25(2) provides that the first element of an assets cost base includes money or property given for the asset.

Deceased estates

There are special rules that apply in calculating the first element of an assets cost base when assets are acquired as a result of a deceased estate.

Section 128-15 of the ITAA 1997, provides that the legal personal representative, or beneficiary, is taken to have acquired their interest in the asset on the date of death of the deceased.

Although a beneficiary always acquires an asset on the date of death of the deceased, the cost base of the asset is determined by when the deceased person acquired the asset.

Section Subsection 128-15(4) of the ITAA 1997, provides that if a deceased person acquired their asset before 20 September 1985, the first element of the beneficiary's cost base and reduced cost base is the market value of the asset on the day the person died. However if the deceased person acquired their asset on or after 20 September 1985, the first element of the beneficiary's cost base and reduced cost base is taken to be the deceased person's cost base and reduced cost base of the asset on the day the person died.

In your case, your parent acquired shares both prior to 20 September 1985 and post 20 September 1985.

Therefore, the first element of the cost base of your shares that were acquired by your late parent prior to 20 September 1985 will be the market value on the date of his passing.

For the shares that your parent acquired after 20 September 1985, the cost base will be your parent's cost base. If you are unaware of what the cost base of your shares was on the date of your parent's passing you could contact the shares registries for companies in question who may be able to assist with the date of acquisition.

You will need documentation to support the cost base you determine for the shares, including how it was established which shares were acquired prior to 20 September 1985.

Information is also available on our website - www.ato.gov.au.

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