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Edited version of private advice
Authorisation Number: 1051802026163
Date of advice: 05 February 2021
Ruling
Subject: Capital gains tax
Question 1
Does Income Tax Assessment Act 1997 (ITAA 1997) sections 118-150 and 118-155 have the effect of allowing the executor to treat the property as the deceased's main residence?
Answer
Yes. The executor can make the election for the property to be the main residence of the deceased.
Question 2
Will Income Tax Assessment Act 1997 section 118-195 apply to disregard any capital gain if the property is disposed of within 2 years?
Answer
Yes. If the property is sold within 2 years of the deceased's date of death any capital gain will be disregarded. The property must be sold prior to XX XXXX 20XX for the gain to be disregarded.
This ruling applies for the following period:
Year ending 30 June 2021
The scheme commences on:
1 July 2020
Relevant facts and circumstances
The deceased purchased a property in early 20XX.
The deceased moved into the property straight away and made the property their main residence.
Late 20XX the deceased moved out of the property and began to rent it out deriving assessable income.
The property was then sold early 20XX (contract date), with settlement occurring later in 20XX.
The deceased elected this property to be their main residence for the whole of her ownership period.
In early 20XY the deceased purchased a vacant block of land, with the intention of building a house on it and treating it as their main residence once construction of the dwelling was completed.
Construction of a dwelling began in early 20XX.
The deceased passed away on mid 20XX.
Construction was completed on the property mid 20XX and the deceased's spouse moved into the property late 20XX.
The title deed for the property was solely in the deceased's name.
The spouse is the executor of the deceased estate, and ownership of the property will pass to the spouse once the necessary legal steps are completed, as per the deceased's will. Ownership should transfer to the spouse in the next X months, and they will try and sell the property within the next XX months, certainly within 2 years of the day of death of the deceased.
The trustee of the deceased's estate makes the election for the property to be the deceased's main residence from the date they passed.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-150
Income Tax Assessment Act 1997 section 118-155
Income Tax Assessment Act 1997 section 118-195
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