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Edited version of your written advice
Authorisation Number: 1013101399216
Date of advice: 26 October 2016
Ruling
Subject: Capital gains
Question
Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 ('ITAA 1997') in relation to the property and allow an extension of time?
Answer
Yes.
This ruling applies for the following period
Year ending 30 June 20XX
The scheme commences on
1 July 20XX
Relevant facts and circumstances
The deceased passed away in 20XX.
The main residence of the deceased ('the property'), formed part of the deceased estate. The deceased purchased the property prior to September 1985.
Your family member has resided in the property since the deceased's date of death.
Probate was granted in 20XX.
The property mortgage liability passed from the deceased to yourself and your family member in 20XX and the title was transferred soon after. This was done to prevent the property being repossessed by the mortgaging bank.
You intended to sell your share of the property to your family member for a set agreed price but before they could obtain finance, the bank required demolition of a second residence, erected without council approval, on the property plus other repairs to be undertaken to the main residence.
The deceased's Will stipulates that the second residence be made available to certain family members to reside in for the X years immediately following the deceased's date of death.
Demolition work commenced in 20XX.
You sold your share of the property to your family member soon after.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 118‑195(1).
Reasons for decision
Subsection 118-195(1) of the ITAA 1997 states that if a dwelling passes to you as a beneficiary of an estate, then you are exempt from tax on any capital gain made on the disposal of the property 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 X years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
In your case, the deceased acquired an interest in the property in approximately the late 1970's. The deceased acquired 100% interest in the property when their partner passed away. The property was the main residence of the deceased until they passed away on DD MM YY.
The Commissioner can exercise his discretion in situations such as where:
● 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 X year period (for example, 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 circumstances outside the beneficiary or trustee's control
Application to your circumstances
Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time.
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