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Edited version of your written advice

Authorisation Number: 1013097736972

Date of advice: 26 September 2016

Ruling

Subject: Capital gains tax - deceased estate - Commissioner's discretion - two year period

Question

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 until dd/mm/yyyy?

Answer

Yes

This ruling applies for the following period

Year ended 30 June 20XY.

The scheme commences on

1 July 20ZZ.

Relevant facts and circumstances

Your parent acquired the property prior to 20 September 1985.

Your parent passed away in 20XX.

The property was your parent's main residence until their death.

Your parent's will, appointed your sibling as executor of the estate.

You and your sibling each inherited a 50% share in the property as tenants in common.

Your relationship with your sibling broke down throughout the period their administration of the estate, and you are now estranged.

You did not contest your parent's will, but you sought legal advice in relation to the administration of the estate. You were not willing to take action through the Court to obtain a proper accounting.

You obtained title to the property in 20YY.

The property was rented out for approximately 12 months after your parent passed away.

You state that it was your intention to sell the property within the two year discretionary period.

The property required extensive repairs to reach a saleable condition. A real estate agent was engaged to organise repairs and ready the property for sale. The agent required both owners to agree on the work to be done before it could be arranged.

You contributed a significant amount toward the repairs however your sibling was of the opinion that the necessary works were more extensive.

Your sibling sought to acquire your interest in the property and made an offer which reflected their opinion of its value with regard to the necessary repairs. You were advised that this offer was below the amount that your share of the property was worth.

Due to your dispute over the administration of your parent's estate, you determined that it would not be prudent to sell your share of the property to your sibling until matters were resolved.

You ultimately sold your 50% interest in the property in 20ZZ to a family member.

Certain documents were provided to support these statements. They are to be read with and form part of the description of the scheme for the purpose of this ruling.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 subsection 118-130(3)

Income Tax Assessment Act 1997 section 118-195

Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision

Summary

The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time until dd/mm/yyyy.

Detailed reasoning

The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person's estate sell that dwelling within two years of the date of death.

Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was:

The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the will is challenged). There must not be any other factors mitigating against exercising it.

In your case, you disputed the administration of your parent's estate with the executor. The executor was also a 50% beneficiary in the dwelling under the terms of the will.

You sought legal advice in relation to the administration of the will, but were unwilling to take Court action. Your relationship with your sibling broke down, and you communicated mainly through third parties.

You state that it was your intention to sell the property within the two year period however the property required extensive repair work in order to reach a saleable condition.

Repairs were arranged by a real estate agent who required the consent of both owners before the works could be completed. There was some delay in obtaining this approval.

You contributed a significant amount towards repairs, but your sibling was of the opinion that the property required more extensive works.

Your sibling sought to acquire your 50% share of the property however you were unable to agree on a reasonable sale price. You eventually sold your share of the property in 20ZZ.

The Commissioner accepts that it is appropriate to grant the short extension of time that you have requested.

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