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Edited version of your written advice
Authorisation Number: 1012758944104
Ruling
Subject: Capital gains tax - deceased estate
Question 1
Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two year period?
Answer
Yes
Question 2
Will any capital gain made by the trustee of the deceased's estate in relation to the disposal of the deceased's interest in the property be disregarded?
Answer
Yes
This ruling applies for the following period:
Year ending 30 June 2015
The scheme commenced on:
1 July 2014
Relevant facts and circumstances
The deceased had an interest in the property that they acquired prior to 1985
The named executors in the deceased's will both predeceased the deceased. You were appointed as executor of last resort.
The deceased's will provided that their share of the property was to be left to their children however title was never legally transferred.
The deceased's children have since died.
The property has now been sold.
Proceeds relating to the deceased's interest in the property will be paid to the estates of the deceased's children.
The property has never been income producing.
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).
The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion:
• the ownership of a dwelling or a will is challenged,
• the complexity of a deceased estate delays the completion of administration of the estate,
• a trustee or beneficiary is unable to attend to the deceased estate due to unforeseen or serious personal circumstances arising during the two year period (eg the taxpayer or a family member has a severe illness or injury), or
• settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for reasons outside the beneficiary or trustee's control.
In this case, the delay in disposing of the property was outside of the trustee's control.
Having considered the particular circumstances of this case, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit.
Accordingly, as the requirements of section 118-195 of the ITAA 1997 have been met, any capital gain made by the trustee on the disposal of the deceased's interest in the property will be disregarded.
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