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Edited version of your written advice
Authorisation Number: 1012748602228
Ruling
Subject: Capital gains tax
Question
Will any capital gain you make on the disposal of your interest in the property be disregarded under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
This ruling applies for the following period:
Year ending 30 June 20YY
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You are an Australian resident for tax purposes.
The deceased was a citizen of another country and acquired a property in that country (the property) after 20 September 1985.
The property was used by the deceased as their main residence up to the date of their death. It was not used to produce income.
You were one of the only living heirs to the deceased's estate. Accordingly, you inherited an interest in the property.
A contract for the sale of the property was entered into. Settlement occurred less than two years from the date of the deceased's death. The sale of the property resulted in a capital gain.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 118-195(1)
Reasons for decision
Subsection 118-195(1) of the ITAA 1997 allows a trustee of a deceased estate to disregard a capital gain or loss from a dwelling that a deceased person acquired after 20 September 1985 if:
the property was acquired by the deceased before 20 September 1985, or
the property was acquired by the deceased 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, and
your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
There is no requirement that the dwelling be Australian real property for the exemption to apply.
In this case, you acquired an interest in the property as a beneficiary of a deceased estate. The property was the deceased's main residence at the time of their death and had not been used to produce income. As your ownership interest ended less than two years from the date of the deceased's death, any capital gain you made will be disregarded.
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