Edited version of private advice

Authorisation Number: 1052242816220

Date of advice: 17 April 2024

Ruling

Subject: Commissioner's discretion - deceased estates

Question

Will the Commissioner exercise the discretion under section 118-195 of ITAA 1997 to allow an extension of time for you to dispose of your ownership interest in the dwelling and disregard the capital gain or capital loss you made on the disposal?

Answer

Yes.

Having considered your circumstances and the relevant factors the Commissioner will allow an extension of time. Further information about the Commissioner's discretion can be found by searching ato.gov.au for 'QC 66057'.

This ruling applies for the following period:

Year ending 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

Person A (the deceased) passed away on DD MM 20YY.

The deceased was unmarried and had no children or Australian relatives.

The primary asset of the estate was a property located at Location A (the property).

The property was the deceased's main residence at the time of death.

The property has never been used to produce assessable income.

The property is less than X hectares in size.

The Administrator of the Estate is confident the property was acquired prior to 20 September 1985.

There were X signed wills, one signed and dated in 20XX, the other signed and dated in 20ZZ.

The will signed and dated in 20XX, appointed Person B, one of the deceased relatives as executor.

The will signed and dated in 20ZZ, appointed a neighbour Person C as executor and gifted the property (including contents) to Person C.

Concerns were raised by Person B to the validity of the second will, these concerns included:

•         circumstances surrounding the execution of the 20ZZ Will, including proximity to date of death and capacity;

•         apparent signature discrepancy in relation to the deceased's signature.

•         inability to identify the witnesses.

•         content inconsistent to known conversations of the deceased; and

•         informal nature and not prepared by a solicitor as were previous wills.

On DD MM 20YY, A caveat was filed in the Supreme Court of Location B to prevent probate of the 20ZZ will being granted.

On DD MM 20YY, Person B let it be known that they were going to apply for probate on the 20XX will.

Between MM and MM 20YY, the lawyers for both Person B and Person C corresponded about the validity of the 20ZZ will.

On DD MM 20YY on the grounds that the deceased did not know and approve the contents of the 20ZZ Will and lacked capacity to sign the 20ZZ Will.

Person C'sapplication for a grant of probate of the 20ZZ Will was filed in the Supreme Court of Location B on DD MM 20YY.

In MM 20YY, Person B not being satisfied with the legal representation of the previous lawyers engaged a new firm.

The new lawyers filed a notice to support the caveat on the grounds that the deceased did not know and approve the contents of the 20ZZ Will and lacked capacity to sign the 20ZZ Will.

In MM 20YY, Law Firm A received Person B's file from the prior solicitor, which included extensive medical files and correspondence relating to the deceased.

On review of this, the solicitors wrote to Person C's solicitors to raise concerns regarding the validity of the 20ZZ Will and requested further information in relation to execution and preparation of the 20ZZ Will. They also requested an update of the steps taken to date to progress the estate administration.

On DD MM 20YY, Person C's solicitors provided details of searches undertaken to identify the witnesses to the 20ZZ Will, which had been unsuccessful to date.

Between DD MM 20YY and DD MM 20YY, further legal correspondence was sent between the parties.

On DD MM 20YY, Person B's application for a grant of probate of the 20XX Will was filed in the Supreme Court of Location B.

On DD MM 20YY, a Directions Order was issued by the Supreme Court of Location B providing further directions in relation to the presentation of evidence and requiring, amongst other things, that a forensic examiner provide a report as to whether the signature on the 20ZZ Will was the signature of the deceased.

Between MM 20YY and MM 20YY, various affidavits were filed in the Supreme Court of Location B.

On DD MM 20YY, the forensic examiner's expert report was received, containing the opinion that the signature on the 20ZZ Will was not that of the deceased.

On DD MM 20YY, Law Firm A were advised that Person C would not be proceeding with his application for a grant of probate of the 20ZZ Will.

On DD MM 20YY, the Supreme Court of Location B made orders pronouncing against the force and validity of the 20ZZ Will and subject to the formal requirements of the Registrar, a grant of letters of administration of the 20XX Will issue to Person D, the duly appointed attorney of Person B, the executor appointed under the 20ZZ Will.

On DD MM 20YY, the Supreme Court of Location B issued a grant of letter of administration pursuant to court orders of DD MM 20YY to Person D as attorney for Person B (the Administrator).

On DD MM 20YY, a real estate agent was appointed, and the property was shortly thereafter placed on the market via an Expression of Interests Campaign.

The legal dispute over the deceased's Will was what resulted in a delay in placing the property on the market for sale.

The expression of interest closed on DD MM 20YY and XX offers were provided to the Administrator.

While considering the XX offers on hand a developer approached the Administrator with a higher offer but a longer settlement date at the end of the expression of interest campaign.

This offer was accepted by the Administrator.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195

Income Tax Assessment Act 1997 section 118-120(3)

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