Taxation Determination

TD 1999/70

Income tax: capital gains: if a dwelling passes to you as a beneficiary or the trustee of a deceased estate and you make a capital gain or capital loss from a CGT event that happens to the dwelling, can you disregard the gain or loss despite your having used the dwelling since the deceased's death for income producing purposes if:

•

the deceased acquired the dwelling on or after 20 September 1985;

•

the dwelling was the deceased's main residence just before their death and was not then being used for income producing purposes; and

•

your ownership interest in the dwelling ends within 2 years of the deceased's death?

• Please note that the PDF version is the authorised version of this ruling.

FOI status:

may be releasedFOI number: I 1021083

1. Yes.

2. Paragraphs 118-195(1)(a) and 118-195(1)(b) of the Income Tax Assessment Act 1997 provide that if a dwelling passes to you as a beneficiary or as a trustee of a deceased estate and you make a capital gain or capital loss from a CGT event that later happens to the dwelling, you can disregard the gain or loss if:

(a)

the deceased acquired the dwelling on or after 20 September 1985;

(b)

the dwelling was the deceased's main residence just before their death and was not then being used for income producing purposes; and

(c)

your ownership interest in the dwelling ends within 2 years of the deceased's death

3. Section 118-190, which applies to increase a capital gain or capital loss from the happening of a CGT event to a dwelling used as your main residence if you used it for purposes of producing assessable income, does not alter the position stated in paragraph 2. Section 118-190 does not operate in that situation to increase the capital gain or capital loss which subsection 118-195(1) disregards.

4. This outcome (namely, that any capital gain or capital loss from a CGT event which later happens to the dwelling is disregarded) applies whether or not the dwelling has been used for income producing purposes within 2 years of the deceased's death.

Note 1:

5. Section 118-190 operates to increase the capital gain or capital loss which subsection 118-195(1) otherwise disregards if, among other circumstances, the beneficiary or the trustee used the dwelling for more than 2 years after the deceased's death both for income producing purposes and as their main residence.

Note 2:

6. Subsection 118-190(4) provides that if the dwelling was the main residence of the deceased just before their death and it was not then being used for any income producing purpose, any use of the dwelling by the deceased person for income producing purposes before their death is ignored.

Commissioner of Taxation
15 December 1999

Previously issued as TD 1999/D40

References

ATO references:
NO 99/10480-5
BO CGT main residence summit 1999

Subject References:
beneficiary
capital gains
death
deceased
deceased estate
dwelling
exemption
main residence
trustee

Legislative References:
ITAA 1997 118-190
ITAA 1997 118-190(4)
ITAA 1997 118-195(1)
ITAA 1997 118-195(1)(a)
ITAA 1997 118-195(1)(b)