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Edited version of private ruling
Authorisation Number: 1011731434957
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Ruling
Subject: Capital Gains Tax
Question 1
Is the amount you received under the Deed of Settlement, subject to capital gains tax?
Answer
No.
Question 2
Are the elements of the cost base applicable?
Answer
No.
This ruling applies for the following period
1 July 2001 to 30 June 2011
Relevant facts and circumstances
Some time ago A and B purchased property, as joint tenants, containing lot 1 and lot 2.
Lot 1 (contains a garage) and Lot 2 (house already built).
The property was the A & Bs main residence throughout their lives.
A passed away. The properties estimated value, at the time of probate, was $xx.
A became the sole registered proprietor of both lots by way of transmission application and beneficiary under B's Will.
A passed away leaving their whole estate to C.
The estimated market value of Lot 1 was $xx and Lot 2 $xx. The market appraisal of the 2 lots combined, by a real estate agency, was between $xx and $xx.
Proceedings challenging the validity of the Will were commenced by you.
You obtained ex parte orders restraining C from carrying out any further administration in the capacity as B's executor.
You and C enter into a Deed of Settlement.
The court proceedings were dismissed.
The property was transmitted into C's name.
Lot 1 and Lot 2 were issued separate titles.
From the time C moved overseas until the settlement of the sale of the lots the property was vacant. It was not used for any income generating purposes and expenses relating to the dwelling have not been claimed by either you or C.
Lot 2 sold for $xx.
Lot 1 sold for $xx.
Under the Deed of Settlement, after the lodgment of income tax returns and payment of any taxes, the proceeds of sale from the two lots are to be split between you and C, each receiving 50%.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Reason for Decision
Section 102-20 of the Income Tax Assessment Act 1997 specifies that you can make a capital gain or capital loss if and only if a Capital Gains Tax event happens. The gain or loss is made at the time of the event. You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law.
You were not a beneficiary of the Will and you did not dispose of an asset, you were a recipient of proceeds from the sale of property, therefore you do not have any CGT implications.