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Edited version of private advice
Authorisation Number: 1051593235150
Date of advice: 23 October 2019
Ruling
Subject: Income tax - capital gains tax
Question 1
Will any capital gain or capital loss that arises in relation to the proposed transfers of the Properties to the Testamentary Trusts be disregarded?
Answer
Yes. Generally, any capital gain or capital loss from a CGT event that results for an asset owned by a person just before their death is disregarded. Law Administration Practice Statement PS LA 2003/12 confirms that:
...the Commissioner will not depart from the ATO's long-standing administrative practice of treating the trustee of a testamentary trust in the same way that a legal personal representative is treated for the purposes of Division 128 of the Income Tax Assessment Act 1997 (ITAA 1997).
For PS LA 2003/12 to apply, the trust in question must be a testamentary trust. In the present case, the trusts are testamentary trusts as they were created under the terms of the Will. Therefore any capital gain or loss made on the transfers of the Properties to the Testamentary Trusts will be disregarded under subsection 128-15(3) of the ITAA 1997.
Question 2
Will the Commissioner treat the trustee of the Testamentary Trusts in the same way as a legal personal representative in accordance with section 128-15(1)(a) of the ITAA 1997.
Answer
Yes. PS LA 2003/12 confirms that the Testamentary Trustees will be treated in the same way as a LPR for the purposes of Division 128.
This ruling applies for the following periods:
Year ending 30 June 2020
Year ending 30 June 2021
The scheme commences on:
1 July 2019
Relevant facts and circumstances
Individual A and Individual B are executors of the estate (Estate) of the late Individual C (The Deceased).
The Deceased acquired real property after 19 September 1985.
The Deceased died on XX/XX/ 20XX leaving a will and the properties form part of the residuary of the Estate.
The Will provides for the establishment of testamentary trusts.
Probate was granted on XX/XX/20XX and the Estate has not been fully administered.
Pursuant to the Will, separate testamentary trusts (Testamentary Trusts) will be established and there will be a transfer of the Properties from the Estate into these Testamentary Trusts
All proposed transfers will be by way of transmission in accordance with the bequests in the Will, and not by way of any exercise of any power of sale.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 128-10
Income Tax Assessment Act 1997 section 128-15
Income Tax Assessment Act 1997 section 128-20
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